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Washington Post
Small-business owners
make the case for helping employees repay student loans
By Danielle Douglas-Gabriel
May 30
As Josh Udashkin took his luggage company Raden from a one-man
operation to an outfit with nearly two dozen employees, rewarding those
who helped him build out the company was important. But rather than
offer a standard benefits package with a retirement plan, the
33-year-old chief executive wanted to provide something with a more
immediate impact.
Udashkin enlisted the help of CommonBond, an education lender that also
helps companies set up student loan benefits. Together, they came up
with a program in which Raden matches the monthly loan payments of its
employees.
“It’s one of these micro-level things that you can do to really make
people’s lives better,” Udashkin said. “Education debt is not optional
for many people and can hold them back.”
Small businesses like Raden are leading the way in helping employees
pay down college debt, proving that you don’t have to be a Fortune 500
company to offer the benefit. A crop of start-ups, including LendEDU,
Chegg, Mitre and Kronos, are giving student loan assistance as much
weight as health-care plans in their employee packages. The benefit is
no small expense, but at a time when millions of young people are
entering the workforce with tens of thousands of dollars in education
debt, it is an enticing offer.
“It’s not the cheapest benefit in the world,” said Ravi Parikh, who
co-founded the data analytics company Heap. “But I wanted to offer
something really positive that’s going to attract people here. It’s
pretty competitive to get good people right now in Silicon Valley, and
this is meaningful and differentiated.”
Parikh said Heap has witnessed a fair amount of revenue growth in the
past year and wanted to beef up the benefits package. Student loan
assistance was a natural fit, he said, because of the company’s young
workforce. He said about a third of his 45 employees are paying off
college loans and could use the help. Heap is in the midst of rolling
out the perk, which provides a monthly contribution of $100 toward the
principal balance.
For now, Teckst, a company that enables two-way text messaging for
customer service teams, is offering about $50 a month to offset student
loan payments. Half of the New York-based company’s 12 full-time
employees have signed up, said founder Matt Tumbleson.
Teckst had initially offered a 401(k) match, but retreated as investors
became weary of the costs. Tumbleson said student loan assistance costs
almost as much as providing a retirement plan, but has been worth the
expense.
“The cost is negligible when it comes to attracting and keeping the
best talent,” he said. “We’ll eventually get a 401(k) as we grow, but
this benefit addresses a more immediate need for our employees. A
majority of our team is just a few years out of college.”
With about 70 percent of college students graduating with debt,
companies are taking notice of student loan assistance programs.
Although only 4 percent of companies surveyed by the Society for Human
Resource Management last year said they offer the perk, the number is
steadily growing. Advisory firm Willis Towers Watson anticipates that
the number of companies offering student loan benefits will grow to
nearly 20 percent by next year.
There are efforts on Capitol Hill to support the perk through the tax
code. A bipartisan bill, introduced by Reps. Rodney Davis (R-Ill.) and
Scott Peters (D-Calif.), would give companies a tax break for providing
employees up to $5,250 a year to repay education debt, while sparing
employees from being taxed on the money. The deduction is comparable to
existing tax benefits for tuition reimbursement. The legislation is
wending its way through Congress.
Although some companies are waiting on the tax break to pull the
trigger, others such as Raden have forged ahead. Six members of the
staff have taken advantage of the pretax student loan program,
receiving up to $200 a month in assistance. Udashkin said he’s not too
concerned about the benefit eating into company profits as the business
scales up because he runs a pretty lean operation otherwise.
Providing the perk is his way to encourage entrepreneurialism.
Udashkin, who graduated from business and law school in Canada without
any debt, said he couldn’t imagine taking the risks of starting a
business with the kind of six-figure debt that is common for people
with advanced degrees in the United States.
“The lifeblood of the American economy is having some people go out,
take risks and be able to build businesses,” he said. “It’s really hard
to take risks when you’re already starting life encumbered by
liabilities around your education.”
Read this and other articles at the Washington Post
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