Rethinking Benefits in the Pandemic Era

Supporting employees’ emotional and financial wellness with an innovative student debt relief strategy


As millions of American workers struggle to adapt to new work and childcare challenges due to the COVID-19 pandemic, financial and emotional stress have risen dramatically. In a recent poll by the Kaiser Family Foundation, 53% of U.S. adults reported that their mental health has been negatively impacted due to stress caused by the coronavirus.1 And 69% of Americans 18 and older report having financial worries, including concerns about debt, according to a survey by the National Foundation for Credit Counseling.2

These new realities are causing many employers to rethink their approach to benefits. Benefits that once served employees’ needs—from gym memberships to commuter reimbursements—are now less relevant, at least for the foreseeable future. An increasing number of employers are looking to new benefit strategies that support not only employee retention and recruitment, but also employees’ emotional and financial well-being.

Focus on student debt

One innovative strategy is offering a benefit designed to help employees pay down their student loan debt. This addresses a critical need among early- and mid-career professionals, as well as older employees that have taken out Federal PLUS loans on behalf of their family members. More than 40 million Americans have outstanding student loan debt, which totaled more than $1.6 trillion—nearly $33,000 per borrower on average.3 It is the largest source of non-mortgage debt today.4 This debt burden is preventing many employees from funding other important priorities, including home ownership and retirement savings.

A student debt repayment benefit is designed to address this by providing direct, after-tax employer contributions toward a participating employee’s loan balance (see sidebar What is a student debt repayment benefit?).

Helping employees pay off their student loan debt faster helps free up money for other important financial needs—including contributions to their 401(k) or 403(b) retirement savings plans.



What is a student debt repayment benefit?


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Reallocating funds for student debt repayment

Funding a student debt benefit does not have to require significant additional funding. Some innovative employers have reallocated money for benefits that are unused during the pandemic, or even unused vacation time, to fund a student debt repayment benefit.

Unum, a premier insurance provider to millions of Americans, launched a voluntary program that allowed participating employees to divert up to five days (40 hours) of their unused paid time off (PTO) annually toward their student loan payments. The results were impressive: 428 employees participated in the program, dedicating a total of $528,748 to paying down their debt. The company’s benefits manager estimated that the program saved participating employees more than $625,000 in loan principal and interest. Notably, the average time converted by employees was 37 hours—nearly the maximum allowed—a clear endorsement of the program’s value.

Reallocating funds for student debt repayment

Increasing retirement plan contributions

A student debt repayment benefit can also help promote retirement readiness.

Experience with Fidelity clients offering a student debt repayment benefit have shown meaningful increases in 401(k) deferral rates, year over year, for participating employees versus rates that remained flat for eligible but non-participating employees.5

Allegro Microsystems, a global leader in power and sensing semiconductor solutions, saw a 20% increase in 401(k) contributions among employees under age 30 who participated in the company’s student debt repayment program, versus a 12% decline in contributions for their eligible coworkers who did not enroll.

Boosting recruitment and retention

Many employers with student debt benefits report that it has proven to be an attractive tool for recruiting new hires. After Fidelity launched its own program internally, 50% of new hires with student debt said the benefit was a major factor in their decision to join the company.6

Once enrolled in a student debt benefit program, the employee has a powerful incentive to stay with the employer that is helping them reduce their loan burden. Experience with Fidelity student debt clients bears this out. Aggregate data from 24 employers shows a 52% reduction in voluntary turnover for employees enrolled in the student debt repayment benefit versus eligible coworkers who did not participate.4

Howard Hughes, one of the world’s preeminent developers and operators of master planned communities and mixed-use properties, reported a 50% reduction in its voluntary attrition rate after introducing its student debt benefit program. This became even more important when the company announced plans to move its headquarters. The company’s benefits manager noted that a number of employees pointed to the student debt benefit as an important factor in their decision of whether to stay with the company and relocate.

Supporting the whole person

As the COVID-19 pandemic continues, forward-looking employers are focusing on innovative ways to support their employees’ emotional and financial wellness, as well as their job satisfaction. Taking advantage of benefits strategies like student debt repayment can help companies address their employees’ needs today, while positioning themselves as an organization that takes a “whole person” approach to employee well-being.

As with any major employee benefit, the keys to success are careful program planning, effective communication, and expert management. Working with an experienced benefits partner, one that has led the industry in the design and administration of successful student debt programs, can help ensure you and your employees make the most of this exciting benefit strategy.

Companies that do it right may find they can replace student debt with a debt of gratitude. What’s that worth?

©2020 FMR LLC. All rights reserved.

The views expressed are as of 9/4/2020 and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of Fidelity Investments. The experts are not employed by Fidelity but may receive compensation from Fidelity for their services. Fidelity Investments is not affiliated with any other company noted herein and doesn’t endorse or promote any of their products or services. Please determine, based on your investment objectives, risk tolerance, and financial situation, which product or service is right for you.






5  Fidelity analysis of 24 early adopters of the Student Debt: Direct Benefit representing more than 100,000 participants.

6 Fidelity internal survey of new hires during 2017; 159 respondents.