Today, Millennials and their younger ‘Centennial’ counterparts face a unique generational challenge: high levels of student loan debt. In fact, nearly 44 million Americans are carrying this burden, which collectively adds up to $1.5 trillion.
Many of these individuals are facing financial hardships as a result.
Today’s workers want and expect professional and career development benefits from their employers. These types of benefits include formalized training programs, mentoring and internal coaching opportunities. However, benefits that involve student loan repayment or tuition assistance could become more popular as millennials become the dominant generation in the workforce.
One city that is making this a reality is Memphis, Tennessee. I got the scoop on the city’s loan assistance program from Alex Smith, the city’s chief human resources officer and one of the main players who helped change the thinking around the city’s employee compensation package.
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When Alex joined the team in 2016, she certainly had a lot to reconcile. For one, the prior mayoral administration had made several retirement and healthcare changes:
- A transition from the traditional defined benefit plan to a hybrid plan containing a defined contribution component,
- A 70% cut to the pre-65 retiree healthcare subsidy, and
- An elimination of the spousal carve-out, which is a measure used by employers to control healthcare costs by placing restrictions on coverage for an employee’s spouse.
Despite these changes, Alex was looking for ways to provide more financial support to Memphis’ employees. And the approach she took centered on student loan debt.
But that money had to come from somewhere. After completing a full scan of her budget, Alex realized that some programs just weren’t being utilized as much as she would have liked. So, she reallocated some funding and made the program happen.
“Reading about this level of student loan debt in the city of Memphis and the challenges that people are having around student loan debt … I decided to take a chance and we first started with a pilot in the spring of 2017,” Alex said. “We conducted a pilot to see whether or not there was interest with a small group and we had, I think, well over 10% of the group participate in the student loan program.”
So, what are the basics of the student loan program? You have to be a full-time employee with the city of Memphis for at least one year. The student loan debt must also be yours and not that of a dependent.
If you satisfy those two criteria, you’ll receive $50 a month toward your principal. And you can sign up by going online and reporting your student loan debt. It only takes about 10 minutes to do. As of the beginning of 2018, approximately 420 employees are utilizing this benefit in the city of Memphis.
“Honestly, it’s been one of the most valuable benefits that we’ve added to our roster… We have employees with over $19,000,000 worth of debt, with the average loan debt balance I believe around 30,000 and … the average person carrying that being 40 years old,” Alex said.
As more and more people pursue higher education, it will be increasingly important to ensure that there’s a way for them to manage their debt. Fortunately, cities like Memphis continue to lead the charge.
Learn more about leveraging education repayment and tuition assistance incentives at City Summit, November 7-10, in Los Angeles, California. Register before September 15 to get 10% off.
About the Author: Anita Yadavalli is the Program Director of City Fiscal Policy at NLC. Anita leads NLC’s Public Sector Retirement initiative, with a focus on research and education for city leaders on retiree healthcare benefits, as well as research and programming on other city fiscal policy issues. Anita holds a Ph.D. in Agricultural Economics from Purdue University, an M.S. in Food and Business Economics from Rutgers University, and a B.S. in Environmental and Business Economics from Rutgers University.