Wherever you go, there’s a good chance that the people around you have student loan debt. Most recent graduates have $35,000 in debt to pay off -- whether it’s to Uncle Sam or private lenders. But a Boston startup called Gradifi wants your boss to help foot the bill.
Gradifi’s founder and CEO Tim DeMello sees the $1.3 trillion student loan debt as everyone’s problem.
“So I set out to create a model to help solve this problem, whereas you have people contribute and pay off students loans on behalf of the individual,” says DeMello.
The Student Loan Paydown plan, or SLP, works like this: every month, the employer contributes to the workers’ student loans. The company decides how much they’re going to put toward it — whether it’s $50, $100, or even $250 per month.
“So the benefit is if you take a $35,000 loan, with interest that’s $42,000 over 10 years. This takes 2.5 years or 25 percent off the loans. So someone who is 22 who was originally in debt till they’re 32 will have it paid off when they’re 29,” says DeMello.
So what’s in it for the employer?
“People are looking at how do we retain and attract millennials—this is the number one issue they are dealing with,” DeMello explains. “Turnover and recruiting are big expenses, referral fees, recruiting fees are all big expense, so if they can save the turnover on their company, it pays for themselves."
While many employers try to lure workers with attractive benefits, like 401ks, companies are finding that most recent graduates don’t really care about saving for retirement yet.
“[Employers] hear about it all the time. They really hear about, 'I really love the 401k plan but retirement is not my problem at age 23. It’s just not my problem. My problem is my student loans, and it’s eating all my discretionary money,'" says DeMello.
Related: Can Employee Tuition Benefits Boost Graduation Rates?
That’s the reason Pricewaterhouse Coopers wanted to get involved. A year ago, the huge consulting firm partnered up with Gradifi to test out the program. Vice Chairman Rob Gittings says providing this kind of benefit to employees gives them a competitive edge.
“It’s a tough market for the top talent, and we are a business that really relies on the intelligence and the industry and the thoughtfulness and the insights of our people. So our ability to attract the best talent and the benefits is one of the things that folks look at,” says Gittings.
And if more companies like PWC take on student debt, they’re potentially setting the stage for how recruits shop around.
“If I’m coming out of school and I have $35,000 in student loans and I have a company that can help with $10,000 of that, I think a lot of people are going to see which companies have it – it is a differentiator,” says Gittings.
And it looks like a lot of other businesses see it that way, too.
Gradifi has a waiting list of over 100 companies across the country that are interested in signing up for the SLP plan.
“The range is a lot wider than what I thought it was going to be. I thought it was going to be pretty much focused on financial, legal, tech,” says DeMello. “Every day we hear from a new group calling that says, ‘Can you do this for us?’”
