Is student loan refi the benefit of the decade?
Student loan refinancing for millennial workers represents a potentially huge opportunity to attract and retain an energetic young talent pool, but there’s a dark side to this employee benefit offering.
To explain, let me get personal.
Like most young people entering the workforce, I was grateful for the financial independence and relieved not to be living in my parent’s basement after graduation. I didn’t really think about employee benefits until my third job, not just because they were generally much better than the previous two gigs, but also because it was for a magazine called Employee Benefit News. Knowing as much about benefits as possible was required reading. That’s when I began a fascinating journey across an ever-changing landscape, where in the course of nearly 30 years I saw many interesting trends come and go.
The first such development occurred when I returned from an assignment in New Jersey, where an academic I interviewed proclaimed that housing assistance would be the employee benefit of the 1990s. My boss and mentor was skeptical of this claim (and the ivory tower from whence it came), which turned out to be the most hyperbolic of any statement made to me on the record.
Ironically, I was actually the beneficiary of such a benefit, when fresh out of college I wrote for a small weekly newspaper in a ski resort town in Vermont. I lived rent free in a home owned by the publisher to help ease the sting of my low wage.
Eventually I learned that it’s fun to have casual Friday, bring your dog to work, get free meals at the corporate cafeteria, receive on-site massages, take advantage of concierge services, and so on and so forth. And in time, I appreciated the practical value of first-dollar health care coverage, 401(k) plan matches, life insurance, disability benefits, tuition assistance, etc. – especially if you had dependents.
Mounting college debt
Fast forward to 2012, when I started writing about a new trend: helping young employees save money on mounting college debt by refinancing the terms of their loans. Four years later, I cited some pretty scary stats about the degree to which young Americans are choking on these obligations, and it made me grateful for the free higher education that my hard-working dad was able to provide.
But what struck me the most was how refinancing a student loan seems far more tangible to millennials than a host of fun perks, or core and ancillary benefit options that are perceived as trivial or arcane by comparison. It also could appeal to baby boomers parents who help their kids pay down these balances in lieu of financing their own retirement.
Could this be the employee benefit of the next decade and beyond? It’s quite plausible, and I wouldn’t be surprised if the number of offerings balloon. On a human level, though, I find this changing benefits landscape a bit sad and frightening. Imagine having to graduate college and work off more than $100,000 in student loans, a scenario that many knowledgeable observers and public policymakers predict will become commonplace.
What does that do to the eternal optimism of youth or how millennials now perceive the American Dream? I will find out through my young children, and in time, will need to keep them from feeling discouraged about their financial prospects and motivated to pursue their passion – just as my own dad did for me decades ago.
This, too, is where benefit brokers and advisers can really step up for their clients on a number of fronts. I see a dual purpose in their role. They certainly can help bring student loan refinancing programs to market through the right set of partnerships and help meet the growing demand for such products or services. But they also can provide the strategic outlook and hand-holding that maintains morale, loyalty and benefits satisfaction. And, in turn, they can help burnish their own consultative (and human) value proposition in a competitive business.