A Plan Sponsor Offers a Student Loan Repayment Benefit

BP-3 is a software and services company based in Austin, Texas, focusing on business process improvement for Fortune 500-sized organizations. It is a small, but growing company, with 90 employees worldwide and about 65 in the U.S.

Scott Francis, CEO of BP-3, says more than one-third of his employees would be categorized as Generation X, but there are also a significant number of Millennials and more every year. He explains that BP-3 hires five or six employees each year from college intern or recruiting programs.

The company has a generous retirement benefit offering—a 401(k) plan with automatic enrollment, a Roth account option and a company match of 50% up to 7% of employee deferrals. The 401(k) plan has a 95% participation rate. BP-3 also pays the full premium for employee and dependent health care.

However, Francis noticed news reports about the problem of student loan debt and employees putting off saving for retirement because of this debt. He says that was also a conversation among employees at his company. Then, two years ago, he heard about Student Loan Genius through Capital Factory, an Austin-based seed stage mentoring program for startups, and by running across the company in a few online mentions. When Student Loan Genius CEO Tony Aguilar reached out to Francis via email, he knew the company was ready for business and not just an idea. “It was at that point we set up our initial meeting to get the process started,” Francis said.

He realized that not only would a student loan repayment benefit be a differentiating recruitment tool, but it also aligned with the company’s philosophy of showing it values its employees. “We value the education investment employees have made for themselves,” Francis says. “Salary signals value for employees, but the student loan repayment benefit would signal value in a more exclusive way. Plus, we want employees to be able to pay back their loans and to be responsible for paying down all their debts.”

Jovan Hackley, director of marketing and PR at Student Loan Genius, who splits his time between Washington, D.C. and Austin, Texas, explains there are several ways to engage the company’s services. There is an online tool to help employees establish the right repayment plan to meet their goals. Genius Pay also directs payroll deduction of student loan payments. Genius Match offers two ways for companies to match student loan payments: a student loan payment made by an employee can trigger a matching payment from the employer to the student loan balance, and with a more recent offering, the student loan payment can trigger a matching contribution to the employee’s retirement plan account.

BP-3 matches payments to the student loan balance. Hackley adds that when an employer offers Student Loan Genius, everyone in the employee’s family benefits. “Parents can use it for a student loan taken out for a child’s education, or an employee can use it for a spouse’s student loan,” he explains.

Francis says the assumption BP-3 had going into the program was that it would benefit employees just out of school, but it has also been a benefit for older employees.

The first step in the process of implementing the benefit is to integrate with a company’s payroll system. According to Hackley, Student Loan Genius has payroll provider partnerships and key relationships to help the process go smoothly. It can work with any payroll provider.

Hackley says Student Loan Genius works with an employer to get data and key contact information. It then sets up employees on the system's back end, eventually going onsite to the employer to do a kick-off meeting. “From then on employees can come to us to get answers to any questions,” he notes.

Francis says BP-3 employees who have worked with Student Loan Genius to get advice about how to handle debt and pay it down are happy with the service. He notes that participation in the 401(k) plan has grown since offering the student loan repayment benefit, but it is hard to quantify how much effect it has had since hiring also increased and the plan uses automatic enrollment. However, one thing Francis has noted is that employees feel more comfortable about 401(k) contributions. “No one is pulling out once enrolled,’ he says.

In addition, since using Student Loan Genius, employees are paying off student loans faster, and they are putting more into the 401(k) to at least get the company match.

Hackley shared data that show $100 in matching can help save up to $74,708 during employees’ student loan repayment, and $100 in matching can help cut repayment time by up to 10 years and 10 months in the most extreme cases.

Francis says the key thing is the student loan repayment benefit has been a culture reinforcement for BP-3. “It reflects to employees how valuable they are to us; we want to help them pay down debts that may be holding them back from investing in future,” he says. “My suspicion is, this will become a more used benefit in the future because the student loan debt problem will be a bigger and bigger concern with each generation.”