In April 2021, Nick Smith received an email from his employer asking if he would be interested in a student debt repayment program. It didn’t take long for him to respond with an enthusiastic “yes.”
Dillon Consulting has partnered with YR Plans’ Smart Benefit program to help some of its employees pay off student debt and officially made the program available to employees in February 2022. Nick Smith has been part of the program since his introduction to the company.
For companies that offer debt settlement assistance to their employees, the goal is to improve the well-being of employees who are dealing with the stress of student loans. Some companies say there’s a big benefit for employers too — these programs help attract and retain employees.
At Dillon Consulting, employees can pay off student debt with employer contributions to the company’s deferred profit-sharing plan equal to employee contributions to the group registered pension plan.
“Employees can contribute to their Registered Retirement Savings Plan (RRSP) and then use the Deferred Profit Sharing Plan (DPSP) to pay off their student debt,” said Tanya Cross, partner at Dillon Consulting.
“By listening to our staff, we’ve found that the stress that student loans can cause has an impact on overall well-being,” Tanya Cross said, adding that Dillon believes the ability to “take control of one’s finances increases.” take over”, creates a better environment for workers.
Smart Benefit was founded in 2019 to help indebted young workers achieve better long-term financial outcomes while meeting employer retention needs, said Deirdre Getty, communications and content director for YR Plans.
With Smart Benefit, the employee never receives the funds themselves, whether they receive them as a percentage of their contributions to a savings plan, a standalone benefit, or a payments matching plan. Instead, all payments go from payroll at YR Plans to the loan provider.
Pilot project with mixed results
Five companies are currently offering smart benefits, and two to three more will be added by 2023, Getty added.
In July 2021, Sun Life Financial partnered with YR Plans to trial Smart Benefit with a range of groups interested in participating in the program.
The pilot project officially started in October 2021 and is scheduled to end at the end of September 2022.
A Sun Life spokesman told The Canadian Press that the company will no longer offer this benefit after the end of the pilot.
“After evaluating our pilot, we decided to focus our efforts on strengthening existing solutions and our core products, and helping customers achieve lifetime financial security,” the spokesperson said in an emailed statement.
While YR Plan’s smart benefit technology works by routing money directly to the lender, tech company SimplyCast has been helping its employees pay off their student loans since 2016 by adding a monthly financial assistance to their paycheck.
Its President and Chief Executive, Saeed El-Darahali, explained that he originally started the program because he had accumulated nearly $60,000 in debt after graduation and would have liked repayment help at the time.
For those who choose to participate, the company uses a formula that takes into account the employee’s salary and the amount of the loan to determine the amount the company adds to the paycheck each month to pay off the loan.
The formula also accounts for significant expenses, allowing it to filter out specific candidates. For example, an employee who owed $10,000 and lived with his parents did not meet the criteria for assistance because he appeared to be able to repay the loan himself. However, it is a rare example, noted Mr El-Darahali.
“So far, not all participants in the program have left the company. So it had the effect of a retention program,” he added.
Depending on the formula, employees can receive monthly loan repayment contributions ranging from $40 to $1,000 per month.
Other employee retention considerations
Amanda Hudson, founder of executive search firm A Modern Way to Work, said she sees trends like this pop up from time to time.
But when it comes to the impact of these programs, she doesn’t think most people “make decisions about where to work or whether to continue working there based on the counterpart of the RRSP or their student loan contributions.”
“I think it’s a good strategy if you’re targeting a large number of new graduates. I think a lot of these benefits are opportunities for employer branding to superficially differentiate itself from other companies. »
However, if the goal is to attract and retain employees, Amanda Hudson believes these perks are not as influential as strong human resources managers and systems, high levels of commitment, and fair wages.
Citing a Gallup employee engagement survey, Amanda Hudson argued that other factors hold employees back more, including job expectations, recognition or praise for a job well done, and opportunities to learn and grow on the job.
Nonetheless, Nick Smith believes the debt-repayment assistance program encouraged him to stay with Dillon Consulting longer than he otherwise would have.
Originally, he expected a term of 13 years for the repayment of his loans.
“I would have been in my 40s when my college debt was paid off. It was pretty dark and I didn’t really know if I was going to buy a house or a car or have kids because it’s hard to consider those things with so much debt,” said Nick Smith.
After he signed up for the program, his payback period was reduced to five years.
“Now there is light at the end of the tunnel, which is comforting and relieves some of the financial burden. »
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