Unum Plans Enhanced Student Loan Debt Repayment Program

Financial insurance provider Unum Group is enhancing the student loan repayment benefit it offers company employees, adding flexibility of timing to help employees allocate assets to savings programs and benefits that lead to improved retirement readiness.

The Unum program, in place since 2020, allows employees to cash in paid time off from the previous year—a maximum of 40 hours per year—for money to pay back student loan debt, explains Carl Gagnon, associate vice president of global financial well-being and retirement programs. Now, instead of only being available during specific periods, employees can trade in carried-over hours at any time.

“We continue to look at ways that we can enhance that program, including broadening it so it’s available [to employees] throughout the year, because people may not have student debt during a window that occurs in January; they have student debt that comes due all year,” says Gagnon. “We’re adding some flexibility in 2024 that’ll open that up so the person can submit for reimbursement and use their carryover any time.”

Program Prioritizes Choice

Unum built the loan repayment program with employee flexibility in mind, Gagnon says.

“It allows us to have employees decide for themselves [where to allocate dollars, because] choice is a big piece of the puzzle for Unum,” Gagnon elaborates. “For some people, they may manage student debt and have it in control. For others, student debt is a burden, and it prevents them from getting out of debt and looking at other options like starting a family, buying a home and paying off other debt.”

The increased flexibility should come at an ideal time, as federal student loan repayments resumed earlier this month following a temporary suspension during the COVID-19 pandemic.

“We had really good buy-in [to the program], but once COVID hit, the Cares Act hit and the federal loan [payment suspension] hit, it kind of slowed down,” says Gagnon. “We did [program enrolment] in an election window for about two to three weeks in late January, early February.”

Since Unum started the program, the company reports that:  

• Employees paid back a combined $2.3 million of student loan payments;
• 47,884 PTO carryover hours were traded back to Unum by 1,386 employees;
• The average eligible employee student debt payment made via the program was $1,515 in 2023; and
• To date, more than 1,800 Unum employees have used the Unum/Fidelity student debt portal to manage their college loans and seek advice on student debt.

Although Unum has not tracked the average amount of student loan debt held by employees, analysis of employees by ZIP code estimates that approximately 2,300 of the company’s 10,500 U.S. employees carry student debt, and the average debt is slightly more than $35,000, says Gagnon.

Recently, Corebridge published data that showed three-quarters of student loan borrowers expected the resumption of payments would affect their ability to save for retirement, and some said they would be forced to reduce retirement plan contributions.

Advice to Fellow Plan Sponsors  

For plan sponsors interested in adding a student loan benefit to support participants’ retirement readiness, Gagnon advises employers to try to be creative.

“Look at newer options,” he says. “[The] Secure 2.0 Act [of 2022] does provide for some additional student loan [programs]—what I call the Abbott [Labs] model—so certainly [plan sponsors should be] taking a look at that. Employers have probably been a little bit reticent to do that, considering all the noise around Roth post-tax contributions for catch-up. Now that that’s settled … maybe some plan sponsors will start looking at that as an option to help with student debt.”

The SECURE 2.0 Act of 2022 implemented a provision to allow 401(k) plan participants to allocate their employer’s matching retirement plan contributions to pay back loan debt. In 2018, the IRS handed down a private letter ruling to plan sponsor Abbott Labs facilitating the plan sponsor’s use of the matching program that it pioneered.

Plan sponsors that are exploring student loan debt repayment programs should investigate what their employees want from their benefits and what financial challenges those workers face, Gagnon adds. Unum conducted surveys on worker engagement and well-being, asking employees to self-assess ­their well-being in four categories: life, health, work and finance.

“What we found is … three of the five biggest stresses in employees’ lives are financial,” Gagnon says. “Generally speaking, the No. 1 stressor in any employee’s life is their work.”

Most employees have more than one savings goal at a time, including preparing for retirement, which is why Unum has tried to implement programs to address student loan repayment—one of the stresses—and gives employees options, Gagnon says.