Can student debt repayment help CUs retain millennial hires?
When millennials talk about money, they often use the sobbing emoji. College debt is compared to slavery, and acronyms like FOMO (“fear of missing out”) epitomize a desire to be free of anxiety about the future and to live in the present.
These are just a few of the ways millennials express negative feelings about money online, according to a report by the Filene Research Institute. With college tuition prices and the need for more education increasing, college debt continues to be a large part of postgrad life. But Filene, along with a newcomer to the credit union landscape, believe student loan repayment programs may be part of the answer for credit unions hoping to attract and retail millennial talent.
A recent report from CU Benefits Alliance, a benefits-consulting firm for credit unions that aims to improve the benefit plan design of financial institutions, credit unions that offer loan repayment programs can better attract and retain millennial hires. The group recommends the after-tax benefit be between $50 and $200 a month or a matching system similar to 401K programs. The program can be advertised during the job interview process, new hire stage or during open enrollment.
Christian Financial Credit Union, based in Roseville Mich., implemented a student loan repayment program in 2014. The initiative, a flat amount and pre-tax benefit, began after Rebekah Monroe, the CU’s marketing manager, participated in a research program that studied how a loan repayment program might attract millennials.
“Student loan debt was the force behind this idea,” Monroe said. “You have millennials coming into the workforce with thousands of dollars of student debt. After talking with our CEO about how we could implement this, I worked with the HR team to develop the materials and framework.” Eleven of the CU’s 120 employees have taken advantage of the loan repayment program.
To qualify, Christian Financial employees must obtain a bachelor’s degree from an accredited school in a major that applies to their job title. They also have to provide a statement from a student loan provider and proof of graduating. Employees can take advantage of the benefit after one full year of employment, and the total repayment amount is $8,750 over the course of five years.
Sets CUs apart
When the program was launched, Filene presented it at their Big Bright Minds conference. “I think this is something that can set CUs apart and make them a desired place to work for millennials or anyone who is graduating from school,” Monroe said.
Monroe believes these programs set her credit union apart from other financial services providers in the area, such as Detroit-based Quicken Loans.
“The fact is millennials will be the majority of the workforce in three years,” said John Harris, president of CU Benefits.
Citing the fact from that 70 percent of college graduates finish their education with debt, according to the Institute of College Access and Success in 2013, Harris said he believes that monthly assistance helps retain young hires longer. According to Student Loan Hero, a student who graduated in 2016 carries an average student loan debt of $37,172. One internal study of CU Benefits Alliance partners showed 90 percent of workers stayed with an employer partly because of student loan contributions.
While statistics on employee retention rates are not separated based on age, CUNA economist Mike Schenk has reason to believe credit unions are having difficulty retaining millennial hires. Turnover at credit unions on average in 2016 was 16 percent. That same year, the turnover rates for entry-level and part-time credit union jobs — the positions millennials would normally fill — were as high as 25 percent and 24 percent respectively.
Adding to this turnover rate in the broader economy, there seems to be a skills mismatch in the market place, Schenk said. For every level of unemployment, there are a greater number of job openings. This may suggest millennials don’t realize what kind of skills they need for the kind of employment they are looking for. And while millennials don’t have the same job loyalty as their older counterparts, credit unions need to be looking for ways to attract millennial hires because of their ability to adapt to changing technologies. And with the federal student loan forgiveness program at risk, millennials may have even more reason in the future to gravitate toward jobs that offer loan repayment benefits.
“We have some real significant federal budget challenges,” Schenk said. “The discretionary spending is a small piece of the pie. Things like education get looked at consistently and very closely over time and are more likely to be on the chopping block.”