Student debt relief is not only an election issue in the 2020 race for president, but a problem for HR managers. Some firms, including a hospital in New York, are doing something about it.
Montefiore St. Luke's Cornwall Hospital began offering a student loan relief program this year for its non-union employees. It employs 1,500 people and provides employees 32 vacation days a year.
Most employees don't take all that time off, said Dan Bengyak, vice president of administrative services at the not-for-profit medical center with hospitals in Newburgh and Cornwall. He oversees HR, IT and other administrative operations.
In February, the hospital detailed its plan to apply paid time off to student debt relief. Employees in the Parents Plus Loan program had the option as well. The hospital set two sign-up windows, the first in May. Forty employees signed up. The next window is in November.
The maximum employee contribution for student debt relief is $5,000. The hospital also provides tuition help. This combination "offers significant financial assistance," to employees seeking advanced degrees, Bengyak said.
A SaaS platform handles payments
The hospital uses Tuition.io, a startup founded in 2013 and based in Santa Monica, Calif. The platform manages all of the payments to the loan services. Its users pay a lump sum to cover the cost of the assistance. The employer doesn't know the amount of the employee's debt. The platform notifies the employee when a payment is posted.
Dan BengyakVP of administrative services, Montefiore St. Luke's Cornwall Hospital
Payments can be made as a monthly contribution, a lump sum on an employment anniversary or other methods, according to Scott Thompson, CEO at Tuition.io.
Tuition.io also analyzes repayment data, which can show the program's retention impact, according to Thompson.
"Those individuals who are participating in this benefit stay longer with the employer -- they just do," he said.
About one in five students has over $100,000 in debt and is, by definition, broke, Thompson said. They can't afford an employer's 401K program or buy a house. Employees with a burdensome loan "are always looking for a new job that pays you more money because you simply have to," he said.
Legislation in pipeline
The amount of student loan debt is in excess of $1.5 trillion and exceeds credit card and auto debt combined, said Robert Keach, a past president at the American Bankruptcy Institute, in testimony at a recent U.S. House Judiciary Committee hearing on bankruptcy. More than a quarter of borrowers are in delinquency or default, he said. Student loan debt is expected to exceed $2 trillion by 2022.
"High levels of post-secondary education debt correlate with lower earnings, lower rates of home ownership, fewer automobile purchases, higher household financial distress, and delayed marriage and family formation, among other ripple effects," Keach said.
Congress is considering legislation that may make it easier for firms to help employees with debt. One example is the Employer Participation in Repayment Act, a bill that has bipartisan support in both chambers. It would enable employers to give up to $5,250 annually per employee, tax free.