Penguin Random House recently announced that it is partnering with Gradifi to offer its employees financial assistance to help reduce their student loan debt. The first book publishing company to offer student loan repayment assistance joins the ranks of other progressive companies, including PricewaterhouseCoopers, First Republic Bank and Natixis Global Asset Management, in offering this innovative benefit.
Current statistics reveal Americans owe nearly $1.3 trillion in student loan debt, spread among about 44 million borrowers. The average individual graduating in 2016 had $37,172 in student loans, up 6% from last year.
See also: Staples implements student loan benefit
Penguin Random House employs approximately 5,000 employees in the U.S., with the majority located in its New York City headquarters. All full-time and part-time employees scheduled to work at least 20 hours a week with outstanding student loans who have been with the company for at least one year will be eligible for the benefit beginning January 2017.
“We are offering a loan repayment of up to $1,200 annually ($100/month) totaling a maximum of $9,000 over 7.5 years for full-time eligible employees,” explains Vicki Fishman, the company’s senior director, people programs. “Regular part-time employees are eligible to receive $75/month for up to 7.5 years adding up to $6,750.”
Fishman notes that the company has always believed in helping to tackle broader societal challenges, starting with its own community.
“We recognize the burden student loan debt is on a large portion of the population and want to offer a meaningful benefit that truly address our employees’ needs,” she says.
All student loan repayments are made through the Boston-based company Gradifi, recently purchased by the First Republic Bank.
“The bank came on board as a client for their own employees in August, and CEO Jim Herbert liked the concept so much, he bought the company,” says Gradifi founder and CEO Tim DeMello, “But Gradifi will continue operation as an independent brand.” It costs clients between three and five dollars per month per employee to use the Gradifi platform.
Gradifi verifies all of the student loans and has a proprietary database of more than 106 different student loan service providers. DeMello says most clients prefer to use their services to deliver student loan repayment to their employees because they know the money is going directly to employees’ student loan accounts. “Also there are currently tax bills with bipartisan support before Congress that would make this a tax-exempt benefit for employees,” he continues.
While Gradifi currently only processes employer student loan payments, they plan to add the capability for employees to make their own contributions via the company platform and employer-matching arrangements based on feedback from current clients.
DeMello initially thought the greatest interest in student loan repayment assistance would come from companies employing knowledge workers, but he says it’s now across the board.
“We have large and small clients from car washes to ice cream shops to advertising agencies,” he says.
While it is still early days, DeMello believes that student loan repayment benefits are already a significant attraction and retention tool.
“Last year, PWC was the only one of the big four U.S. accounting firms offering [the program], and they told me this new benefit was one of the main reasons why their on-campus recruiting was so successful.”
“The way we look at it is that today offering student loan repayment is a differentiator, but in future it will be table stakes,” he concludes. “There are only about 100 companies that have plans now, but they will likely become mainstream by 2018 once supportive tax laws are in place.”
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