Recruit millennials by lending a hand with student debt
Could some help repaying student loans get millennials to overcome their disinterest in banking?
It seems like a symbiotic relationship: The banking industry needs to recruit young employees, while new college graduates are scrambling for ways to repay their student loans. So a few institutions on the Best Banks to Work For list see student loan assistance programs as a promising new benefit.
"Our culture is something we are proud of. We believe if we can find a way to stand out at college fairs, our culture will sell itself over time," said Pat Lewis, director of human resources at Chesapeake Bank.
The $740 million-asset Chesapeake is located in a bucolic part of Virginia near its namesake bay. It faces the same succession planning issues common at many rural banks.
Chesapeake plans to add student loan repayment as an option for employees with its annual open enrollment for benefits this fall. It is still finalizing the details, but Lewis said Chesapeake is hoping that relief from student debt coupled with a management trainee program will help bring in young talent.
"It can be difficult to attract recent graduates to our area," Lewis said.
A career in banking, and in particular a career at a retail bank, "is not something that is on the minds of the average college sophomore," said Jeff Marsico, an executive vice president at the Kafafian Group, a bank advisory firm in Parsippany, N.J.
The challenge, Marsico said, is to make sure the benefit does not become a source of resentment for older employees who have either already paid off their loans or just dislike that other employees are getting a monetary benefit they cannot participate in. They might view student loan repayment as being offered at the expense of another benefit that would be of more use to them.
Marsico recommends banks fashion a flexible benefits package with options that equalize the overall expense of benefits per employee. For instance, perhaps young people taking advantage of the student loan benefit might be restricted to a high-deductible health plan with a health savings account.
Given that an estimated 44 million Americans graduate with student loans, a repayment benefit is a smart move, Marsico said.
According to a 2016 report by the Society for Human Resource Management, only 4% of employers nationwide offer a repayment benefit. But it is something that more companies from various industries are starting to consider.
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CommonBond, an online lender that specializes in refinancing student loan debt, recently launched a platform that enables employers to contribute to their employees' student loan repayments every month. About 200 companies are using CommonBond for Business, including a few community banks, said its chief executive, David Klein.
"A third of the workforce is millennial and 70% of those millennials have student debt. And companies are looking for innovative and effective ways to recruit and retain top millennial talent," Klein said in an interview. "There is a sea change going on in the war for talent and we are at the beginning of it."
The American Bankers Association, which provides its employees with up to $1,200 per year for student loan debt, in February endorsed a repayment benefit offered by Gradifi. Rob Nichols, the trade group's president and CEO, said this kind of benefit would help banks attract and retain millennials.
Gradifi, a Boston startup that was acquired last year by First Republic Bank in San Francisco, runs a platform used by employers to make direct contributions to employee student loans, reducing overall repayment time and cost of the loan. Chesapeake is working with Gradifi on its benefit plan.
South Dakota's First Bank & Trust added student loan repayment to its benefit plan earlier this year. Those who graduated within the last three years are eligible for up to $6,750. The assistance is available either in small amounts over a five-year period or as a lump sum after three years of service, and requires participants to show proof of the loan balance.
Within the first few months of the benefit being offered at First Bank, 10 employees had enrolled. Five others are working through the application process.
First Bank hopes the benefit will foster employee retention.
"There's a real risk in the first year or two of losing a young employee," said Jodi Siemers, director of marketing at First Bank. "We think if we can keep them here for three to five years, let them get to know the bank's culture and the opportunities for advancement, they are going to make a career out of this."