Unum’s student loan debt solution: Letting employees trade in vacation time
Go on vacation, or pay off that student loan?
That’s the unique quandary that insurance company Unum is offering to its employees as a way to help them pay off their college debt.
Beginning next year, employees of the insurance company can transfer up to five days, or 40 hours, of carry-over paid time off into a payment against student debt through a new program managed by Fidelity Investments.
Though choosing between paying off loans or taking a vacation may be considered a tough option to present to employees, the average employee leaves unused vacation time on the table, which makes it a unique resource for Unum to tap in trying to address the nation’s student loan crisis.
Last year alone, American workers gave up about $62.2 billion in lost benefits by forfeiting more than 200 million vacation days that could not be rolled over, according to Project: Time Off, which is sponsored by the U.S. Travel Association.
A handful of employers — including Estée Lauder, Sotheby’s, Carhartt and Pure Insurance — have recently rolled out student debt benefits, but Unum’s program is a first. Those companies contribute monthly stipends to their workers; the funds are applied to the principal on the loan, which helps the employee pay off the loan faster and save on interest. Other firms, including Fiat Chrysler and Humana, offer a student loan refinancing benefit to workers.
Unum says its new benefit gives its “employees a choice to use their benefits in ways that work best for them” while helping them reduce financial stress and improve overall well-being.
So how much can an employee expect to pay off on their loans? The payment is based on an employee’s hourly rate. So, if a Unum employee who is making $50,000 a year decided to transfer five days of PTO into a payment toward his student debt, he would be able to transfer $961 into student debt repayment annually, explains Unum.
“Not only is that a significant payment toward student loan debt, it can also reduce their interest payments on loans and potentially shave years off their loan repayment,” says Carl Gagnon, Unum’s assistant vice president of global financial wellbeing and retirement programs.
Beginning in their first year at Unum, full-time employees receive 28 days of paid time off, including holidays and personal days, with additional PTO available over time. Each year, employees can carry over up to five days of unused paid time.
Unum estimates that 25%-30% of its workforce — the company has about 8,700 employees — carries student loan debt, either their own or their children’s. The new benefit is available to any U.S. employee who has student debt, including parents who have taken out educational loans for their children. It will go into effect in January 2020.
“We announced this benefit to our workforce in January of this year so employees have a whole year to plan their PTO accordingly if they’d like to take advantage of it,” Gagnon says.
The reaction from employees has been “really positive,” Gagnon says.
Jimmy Valentine, a professional development program associate at Unum, is one of the employees planning to use vacation days to pay off his loans. He graduated from the University of Florida in 2011 with about $32,000 in student loan debt. His balance is now roughly $22,000.
“It’s a big deal,” Valentine says. “I’ll be able to apply almost a year of payment toward my student loan debt and can use that savings for something else, like increasing my 401(k) contribution.”
Fidelity Investments called Unum an “innovator” in its new approach to take on employees’ student loan debt.
“Finding creative solutions for people to tackle this challenging issue is one way many companies are partnering with Fidelity to provide more help when it comes to their employees’ financial wellness,” says Ashwini Srikantiah, vice president of Fidelity’s student debt program.
In general, about 4% of employers offer a student loan repayment benefit, according to the Society for Human Resource Management.
“This type of benefit did not exist when I was on the job hunt,” Valentine says. “But I know it will be a game-changer for many.”