BOONE — As recent college graduates take on increasingly heavy burdens of student loan debt, one area grocer is offering relief to its employees.
This month, Fareway Stores Inc. became the latest company to offer programs to assist employees with student loan payments. Fareway official Chad Carter, vice president of benefits, said the Boone-based grocery chain will provide full-time employees $100 a month toward student loan costs, or up to a total of $5,000.
“We feel that we have a pretty competitive benefit package now for our employees, but we’re always looking to improve,” Garrett Piklapp, Fareway senior vice president, said. “Our wheels are constantly turning internally regarding how we can recruit and retain excellent talent.”
The loan payments will be administered by a third party, with payments made directly to the lending company and applied to the principal balance, he said. According to a news release, about 3,000 Fareway employees are eligible for the benefit, and Piklapp said those employees range from current college students to older adults continuing education.
Analyst Mark Kantrowitz said adding loan payments to employee benefit packages is now as important as offering retirement contributions.
“College graduates worry more about their student loans than they worry about retirement,” said Kantrowitz, vice president of research for SavingforCollege.com" target="_blank">SavingforCollege.com. “Student loan payments are certainly a good recruiting and retention tool. It’s why Amazon raised minimum wage to $15, because we have very low unemployment right now. Employers have to compete more to attract employees. This is one way for employers to recruit college students and grads.”
Kantrowitz, who analyzes student loan data and college costs, said he’s starting to see more companies offering student loan payments as benefits. But nationally, only 4 percent of companies offer student loan repayment matching or assistance, according to the 2018 Benefits Report, a survey by the Society for Human Resource Management.
Nationally, employers offering loan payments include Staples, Estee Lauder and Fidelity Investments.
Average student loan debt nationwide has been growing by around $1,000 to $2,000 each year. In 2011, the average bachelor’s student graduated with about $17,616 in debt. Last year, the average four-year grad took home $29,812 in student loan debt, according to SavingforCollege.com.
In Iowa, student debt has grown about 28 percent over the past decade, averaging close to $30,000, according to the Institute for College Access & Success. About 70 percent of four-year students graduate with debt in Iowa.
And those numbers increase if you take into account Parent PLUS loans and private loans under parents’ names, Kantrowitz said. Last year, average parent loan debt nationwide rose to $35,584, according to his data.
Student loan debt has reached several milestones in recent years, he said, including surpassing the amount of outstanding credit card and auto loan debt. The soaring cost of college is a major contributor to the problem, he said.
“Debt is also growing so much because government grants and appropriations have not been keeping pace with increasing college costs,” he said. “The cost of education is going up, but money from the government is not, shifting the burden to the families.”
For students and families unable to afford the higher cost of college, Kantrowitz said student loans provide the “only degree of elasticity.”
“At the same time, family income has been almost flat since 2000. There was a slight uptick last year, but nothing major. So families don’t have any other way to pay for college, but to rely on loans,” he said.
Kantrowitz said student loan debt “can be affordable,” depending on the borrower’s income after college, but he added the debt-versus-income ratio varies greatly.
“We have to realize student loans are paid back over decades, not months or years like credit card debt,” he said. “So each new class is graduating with debt, while the paying back of debt for existing borrowers is relatively slow. For parents, they often cannot afford to pay off debt for their children. Students are often the ones making agreements to pay off the parent loans, too.”
As the burden of student loans makes it more challenging for this generation to afford housing and basic necessities, he said offering employee loan assistance programs is one way employers can help out their workforce.
“Just as an observation, I’ve seen health care firms, especially in nursing, tend to offer loan repayments,” he said. “They have a hard time recruiting nurses, so some of them have even gone beyond loan repayments and are giving employees bonuses sufficient enough to pay off student loans.”
Kantrowitz said several lawmakers in recent years have pushed for legislation regarding employers’ student loan repayments. The Student Loan Repayment Acceleration Act, introduced in October, would offer companies the ability to make annual tax-free contributions toward employees’ student loans.
The debt repayment plays would work similarly to a 401(k).
“The watershed moment will be when Congress takes action to make loan repayments tax free,” Kantrowitz said. “Then, all of a sudden, most employers will want it. HR departments are already dealing with 401(k) and other benefits. This’ll just be an additional part of the workload of HR staff. And it’s something they will quickly adopt, especially if they’re in a very competitive environment for employees.”
Kantrowitz predicts employers soon won’t be the only ones struggling to recruit young talent. If college costs continue to rise, he argued, schools will also face a recruitment problem.
Fareway officials said they’re happy to be one of the first companies in the area offering a loan payment program.
“We are excited to provide this additional benefit to our employees,” Fareway CEO Reynolds Cramer said in a statement. “It will help reduce the financial stress of paying student loan debt and encourage employees to consider higher education who may not have previously due to its cost.”