Mercer Bolsters Millennial Recruiting by Offering Student Loan Refinancing
Posted By Donna Fuscaldo on August 15, 2016 at 6:58 pm
By 2020, millennials will make up the lion’s share of the workforce, which means compete to recruit and retain this most talented members from this group of workers. One emerging tactic: Employers increasing offer help with this group’s student-loan debt. Mercer, the global consulting company, offers employees student loan refinancing as part of a financial wellness package of benefits.
How did it come to this? Companies increasingly recognize that traditional benefits such as healthcare coverage and 401 (k) plans don’t have great appeal for millennials, who are (a) generally in good physical health and (b) generally in terrible financial health. Those students in the latter company struggle with paying off student loans, so they’re not terribly interested in contributing right now to a company-sponsored retirement plan—even though they should be.
Realizing this, some corporations are starting to offer student loan repayment assistance. Mercer wants to help with the debt problem but is taking a different approach. As part of its new financial wellness benefits, it pushes student loan refinancing. “Millennials are coming into the workforce and many are burdened with student loan debt,” says Betsy Dill, senior partner, Mercer’s financial wellness business line. “For those employees, oftentimes paying down that debt is the first financial priority.”
Student loan financing part of a package
Mercer has teamed with a handful of financial services companies to provide a suite of financial wellness products geared toward corporate America. It tapped Plaid to help it aggregate financial accounts, Transamerica for retirement counseling, Experian to offer credit score management, Avant to offer unsecured personal loans and CommonBond for student loan refinancing.
“What we are looking to do is offer a program that would complement what many employers already have in their line up,” Dill says. “A lot of employees didn’t have anything to help address managing debt. That’s what led us to include CommonBond in the mix.”
While student loan refinancing isn’t everyone’s problem, it does impact a large portion of the population. Total student loan debt stands at more than $1 trillion dollars: Many debt holders are millennials who put off getting married, buying homes and saving for retirement as a result. The Center for Retirement Research found carrying student loan debt can have the same impact on retirement savings as unexpected healthcare costs and increasing the Social Security retirement age.
When it comes to reducing the burden of student loan debt, most companies trying to tackle it focus on paying down a portion of it rather than offering refinancing. PWC and Fidelity Investments are two example of corporations that chose that path. After all, refinancing may not be for everyone, but free money from a company is. Since Mercer is focusing on managing debt, it makes sense that loan consolidation and refinancing would be in the mix. CommonBond offers relatively low interest rates starting at 2.14 APR and capping out at 7.74 percent. Borrowers who get the lowest rates can save $14,581 on average. The average interest rate on a Federal Loan is 3.76 percent.
Student loan refinancing vs. repayment
Still, financial aid expert Mark Kantrowitz, publisher and vice president of strategy at Cappex.com, doesn’t think providing employees with the ability to refinance student loans adds any value. “These deals seem to be little more than marketing arrangements, since the employees could already have refinanced through the lender’s web site on their own,” Kantrowitz says. “The employees do not seem to be getting any extra benefits or savings; the interest rates appear to be the same.”
CommonBond isn’t the first student loan lender to ink a deal to reach more potential borrowers. Late last month, Wells Fargo entered into a partnership with Amazon.com in which Amazon Prime Student customers get an interest rate reduction when they apply for one of Wells Fargo’s student loan products. Wells Fargo says it teamed up with Amazon because it’s trying to reach potential customers online. It’s hoping Amazon’s brand name and reach will pique the interest of college-bound students or those with existing loans who will then check out its loan products.
While Mercer is focusing on CommonBond’s refinancing and consolidation loans, Phil DeGisi, chief marketing officer at CommonBond, says that’s likely just the start. In July, it raised more than $300 million in funding, purchased Gradible—a student loan management platform—and is in the process of launching an employer-based student loan repayment platform. “Right now we are in the early days of adoption,” DeGisi says. “We’re working with partners to offer the ability for employers to pay down student loans through contributions as well as offering a new student loan assessment tool.”
The assessment part of the equation is one of the reasons CommonBond purchased Gradible. “Not everyone is going to be right for a refinancing,” he says. “With the assessment tool, it points people in the right direction whether it’s a federal loan, income based payment program, or public service loan forgiveness.”
GoodCall offers more information about refinancing student loans and what you need to know about it.