Employer debt repayment benefits seek to retain employees and ease financial stress

In 2019, Nick Smith graduated with $50,000 in debt – $30,000 in student loans and $20,000 on a student line of credit.

Low-paying jobs and a high cost of living made it difficult for Smith to reduce his debt until he was hired as a mechanical technologist in Halifax with Dillon Consulting Limited.

In April 2021, Smith received an email from his employer asking if he would be interested in a student debt repayment program. His answer was a resounding “yes”.

Dillon Consulting has worked with YR Plans Inc.’s Smart Benefit program to help some of their employees pay off student debt, and officially made the program available to staff in February 2022. Smith has been with the program since its inception at the company.

For companies offering debt repayment assistance, the goal is to improve the well-being of employees facing the stress of student loans. Some companies claim that there is also a major benefit for employers – this benefit helps attract and retain employees.

At Dillon Consulting, employees can pay off student debt using employer contributions to the company’s deferred profit sharing plan that match employee contributions to the group registered retirement savings plan.

“Employees can contribute to their Registered Retirement Savings Plan (RRSP) and then use the Deferred Profit Sharing Plan (DPSP) match to pay off student debt,” said Tanya Cross, partner at Dillon Consulting.

“Listening to our employees, we’ve learned that the stress student loans can cause impacts overall well-being,” Cross said, adding that Dillon believes the ability to “take control of their finances” creates a better environment for its workers.

Dierdre Getty, director of communications and content for YR Plans, said Smart Benefit was founded in 2019 to help young workers with debt achieve better long-term financial results while meeting employer retention needs.

With Smart Benefit, employees never receive the funds themselves, whether they receive them as a percentage of their contributions to a savings plan, a stand-alone benefit or a matching plan from payments. Instead, all payments flow from payroll to YR plans to the loan provider.

Currently, five companies offer the Smart Benefit, with two to three more to be onboarded before 2023, Getty said.

In July 2021, it was announced that Sun Life Financial Inc. would partner with YR Plans to pilot Smart Benefit with a number of groups who wanted to participate in the program.

The pilot officially started in October 2021 and is expected to end at the end of September 2022.

A Sun Life spokesperson told The Canadian Press that the company will not continue to offer the benefit after the pilot ends.

“After evaluating our pilot project, we decided to focus our efforts on strengthening existing solutions and our core products, helping customers achieve lifelong financial security,” the spokesperson said in a statement. by email.

While YR Plan’s Smart Benefit technology works by sending money directly to the lender, technology company SimplyCast has been helping employees repay student loans by adding monthly financial support to their paycheck since early 2016.

President and CEO Saeed El-Darahali said he originally started the program because he graduated with nearly $60,000 in debt and wanted help. reimbursement at the time.

For those who want to participate, the company uses a formula that evaluates the employee’s salary and the amount of the loan to determine how much the company will add to their paycheck each month for loan repayment.

The formula also takes into account large expenses and can thus filter candidates. For example, an employee who owed $10,000 and lived at home did not meet the criteria for support because it appeared he had the ability to repay the loan on his own. It’s a rare example, however, he says.

“So far, not everyone who has participated in the program has left the company. So it’s a retention program,” he added.

Depending on the formula, employees can receive monthly loan repayment contributions ranging from $40 to $1,000 per month.

Amanda Hudson, founder of A Modern Way to Work, a human resources consultancy, said she sees trends like this popping up from time to time.

But when it comes to its effects, she doesn’t think most people “make or break decisions about where to work or whether to stay based on their RRSP match or loan contributions.” students”.

“What I think is good for strategy is if you target a large number of new grads. I think a lot of those perks are employer branding opportunities for people to stand out from another company on the surface.

However, if the goal is to attract and retain, Hudson doesn’t think these peripheral perks are as influential as strong managers and HR systems, high engagement, and fair wages.

Referencing Gallup’s employee engagement survey, Hudson said what holds employees back the most are engagement factors, which include knowing what’s expected of you at work, receiving a recognition or praise for good work over the past seven days, and having opportunities at work to learn and grow, for example.

From Smith’s perspective, the program spurred him to stay with Dillon Consulting longer than he otherwise would have.

Initially, he expected to take 13 years to finish repaying his loans.

“I would have been over 40 when my student debt was paid off. It was pretty dark and I didn’t really think about whether I was going to buy a house or a car or have kids because it’s hard to consider those things with so much debt,” Smith said.

After enrolling in the program, this repayment term dropped to five years.

“There is now a light at the end of the tunnel, which is comforting and alleviates some of that financial stress.”

This report from The Canadian Press was first published on September 6, 2022.


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