We’ve been hearing a lot lately about employers introducing student loan benefits into their rewards packages. With recent college graduates struggling under an unprecedented load of student debt, programs that help them reduce their debts by thousands of dollars seem like an obvious win-win for employers with young workforces. Student loans aren’t the only form of debt that employees could use help paying off, however. “Worried about their financially strapped workforce,”Rachel Emma Silverman writes at the Wall Street Journal, “a handful of companies are stepping in to offer employees alternatives to payday loans and other expensive financial products”:
Some 12 million Americans use payday loans each year, according to Alex Horowitz, senior research officer with the Pew Charitable Trusts’ small-dollar loans project. Retirement borrowing remains common, too. According to the Employee Benefit Research Institute, 20% of all eligible 401(k) participants had loans outstanding against their 401(k) plan accounts at the end of 2014, up from 18% in 2008.
As an alternative, employers are joining with firms such as Kashable LLC, Ziero Financial Inc. and Zebit Inc. to help fund and service loans. Some companies are offering those products in conjunction with employee-focused seminars about saving, budgeting and debt.
Such loans could end up putting employees further into debt, critics say, especially if workers are unable to keep their spending in check. Loans “need to be utilized with some caution,” said Kent Allison, national leader of consulting firm PwC’s employee financial wellness practice. Some employers aren’t eager to offer loans, either, but say their employees lack other good options.
This trend illustrates employers’ growing awareness of “financial wellness”—the notion that employees with greater financial security are healthier, happier, and more productive. A recent study that looked at the financial wellness of the three main generations making up today’s workforce found that millennials are the worst off, but even baby boomers, who have had more time to save and plan, are not as financially “well” as they’d like to be, with half saying they didn’t know whether they would be able to retire comfortably and only 58 percent saying they had a plan to pay off their debt.