As part of a new workplace benefit, Memphis will become the first city in the nation to help its employees tackle student debt.
The city on Thursday announced it will contribute $50 a month to the student loan account of any employee who has worked for the city for at least a year. The benefit, which will be managed by administrator Tuition.io, will kick in July 1.
Alex Smith, Memphis’ chief human resources officer, says the key motivation behind the benefit is to help employees and show them they are an “important investment.”
“We know that professional development is important to our workforce,” she says. “We were looking for a program to complement our tuition reimbursement program and provide additional support to our employees as they pursue advanced education. We also know that student loan debt is a concern for our workforce … [and] we believe that this program will help lighten the financial burden on our employees.”
Smith pointed to a recent report from the Federal Reserve Bank of St. Louis that found student debt levels in Memphis increased 5% in 2015, compared to 3% nationally. The average borrower in the River City has $31,000 in student loans.
Additionally, Smith notes, the “compelling and competitive benefit” will help the city attract and retain talent.
“[This] provides us with a unique opportunity to offer a competitive benefit to our employees — a benefit that no other municipality is currently offering,” she says. “We see this as a great opportunity to attract and retain top talent for the city of Memphis and effectively compete for talent.”
About 840 city employees — 14% of the city’s workforce — are expected to benefit from the program, Smith says.
Memphis joins a small but growing number of employers offering student debt repayment as a workplace benefit. Companies including Aetna, Staples and Penguin Random House have recently implemented the benefit. Though only about 4% of companies offer student loan assistance, according to the Society for Human Resource Management, that number is expected to jump in the next few years. Consulting firm Willis Towers Watson predicts the number could hit 20% by 2018.
Industry experts agree, noting that the perk is a win-win for both employees and employers. It helps ease employees’ financial stress — which in turn will keep them happier and more productive at work. At the same time, the benefit serves as a recruiting and retention tool for employers. The vast majority of employees (86%) say they would stay with a company for at least five years if their employer helped pay down their student loans, according to research by American Student Assistance, a Boston-based nonprofit that focuses on eliminating finances as a barrier to further education and professional growth.
Student debt is a growing problem for employees: There are more than 44 million borrowers with a total of $1.3 trillion in student loan debt in the U.S., according to the latest statistics. And, according to ASA, the burden is impacting workers on the job: 56% worry about repaying their loan either all the time (26%) or often (30%). Forty percent report that worrying about their student loans has impacted their health, while 61% have considered getting a second job to help pay off their student loans.
Those statistics are reason enough for smart employers to begin offering the benefit, says Scott Thompson, CEO of Tuition.io.
“As the first major American city to embrace student loan assistance, Memphis is proving itself to be a leader in understanding and catering to the needs of today’s workers,” he says. “Their initiation of this program should be a clarion call for other municipalities to follow suit. The burden of student loan debt is not a problem limited to private sector employees, and cities both large and small have significant numbers of workers who can benefit from debt reduction programs.”
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