Loan Repayment Assistance Programs (LRAPs), where employers help employees repay student loan debt, are quickly catching on. In fact, hundreds of companies are now offering this as a benefit.
Financial protection provider Unum is expanding on this concept by offering a first-of-its-kind student debt relief program. Unum will allow employees to exchange vacation days for help paying down their student loan debt.
Unum Partners with Fidelity
Fidelity Investments Inc., otherwise known as Fidelity, is one of the first companies to offer LRAPs. They understood that helping employees repay their student loans was a wildly popular benefit.
Fidelity introduced the Student Debt Employer Contribution benefit in January 2018. It was designed to reduce the strain of student loan debt, while helping recruit and retain talented young workers.
It has gained a lot of momentum in just a short period of time. Just a year after its conception, roughly 10,000 eligible US employees are actively participating in the program.
Unum recently announced that it’s partnering with Fidelity to offer an innovative new benefit to help employees tackle their student loans. With Unum’s student debt relief program, eligible employees can transfer carry-over paid time off (PTO) and use it as payment against their student loan.
Details on Unum’s Student Debt Relief Program
A Unum press release explains exactly how this program will work.
Beginning their first year, full-time employees receive 28 days of paid time off annually, including holidays and personal days. Additional PTO becomes available over time as the length of the employee’s tenure increases.
Unum will allow eligible employees to carry over up to five days (40 hours) of unused PTO to repay their student loan debt. Under this arrangement, employees can reduce their debt by leveraging unused PTO.
And it’s not just for recent graduates. It’s available to any US employee with student loan debt. This includes parents who have taken out loans to put their children through college (e.g., the Federal Direct Parent PLUS Loan).
The program will officially begin in January 2020 when all eligible employees can participate.
An Innovative Solution
This is an interesting spin off of traditional LRAPs and gives employees a new way to take control of their student loan debt. It’s an out-of-the-box approach that puts Unum on the cutting-edge of employee benefits.
“We applaud Unum for working to offer their employees a new way to get a handle on student debt,” writes Ashwini Srikantiah, vice president of the Student Debt Program at Fidelity. “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.”
It’s also very practical. The program offers employees a simple way to take a chunk out of student loan debt by giving up a portion of their PTO.
And it’s something that should make Unum a desirable place to work.
The Impact on Retention
Programs like this one are mutually beneficial for both employees and employers.
Employees win because they’re able to chip away at their student loans and pay them off more quickly. Employers win because it helps them attract and retain top young talent.
In fact, 86 percent of young workers say they would commit to working for an employer for five years if they helped pay off their student loan, says American Student Assistance.
Fidelity discovered a 75 percent lower turnover rate among first-year participants of their own employee program. They also maintained a consistent turnover reduction in following years.
Besides that, Fidelity found that help with student loan debt factored in heavily into the decision for half of new hires joining their company.
The Next Phase of Student Debt Relief Benefits
The number of companies offering LRAPs as a benefit is on the rise. Unum’s upcoming program marks an evolution in this type of initiative.
If successful, and there’s a good chance it will be, other companies will likely follow suit. This may also set the stage for student debt relief manifesting itself in even more ways in the future.