Muskegon, MI, City Manager Get Student Loan Pay-Off in New Contract
Inside Subprime: Aug 29, 2018
By Kerry Reid
Employees angle for all kinds of perks and benefits – from healthcare to retirement savings. But more recently, employers have been offering to pay back part or all of their workers’ student loan debts as part of the benefits package.
Take for example Frank Peterson, the city manager of Muskegon, Michigan. In a recent contract renegotiation, Peterson, 38, not only earned a $10,000 raise that put his base salary at $140,000. He also got the city to agree to pay off a significant chunk of his student loan debt from Western Michigan University.
As reported by Ben Solis of mlive.com on August 27, Peterson gave the city a commitment to stay in the job until at least June 30, 2023. In return, they agreed to place $600 in monthly payments in an educational savings account in order to help retire Peterson’s debt of just over $33,000.
Peterson’s deal isn’t an outlier. As reported by Annie Nova of CNBC on May 19, more companies are starting to look at helping employees with their student loans as a hiring and retention incentive.
It makes sense, since Americans owe $1.5 trillion in student loans. According to a recent study by the American Association of University Women, women account for nearly two-thirds of that debt. (https://money.cnn.com/2018/06/05/pf/college/student-loan-stats/index.html)
Looking for relief at the federal level seems like a long shot. In August, Seth Frotman, the student loan ombudsman for the Consumer Financial Protection Bureau (CFPB) resigned, charging in his resignation letter that under acting director Mick Mulvaney, “the Bureau has abandoned the very consumers it is tasked by Congress with protecting.” Among the safeguards Frotman cited as threatened by Mulvaney’s CFPB are potential plans to end the student loan forgiveness program.
Mulvaney has also indicated that he wants to move the student loan division of CFPB into the consumer information department – a move that Nova of CNBC described on August 27 as “signalling that he saw its mission as more education than investigation.”
But while the federal government may be dragging its feet, the private sector is beginning to respond to the student-debt crisis. Earlier this year, Fidelity Investments began offering employers who use their benefits services a way to implement a “Student Debt Employer Contribution.”
A 2017 study by the nonprofit American Student Assistance showed that at least 86 percent of young workers would commit to staying at a company for five years in exchange for help with their student loans.
In the case of Peterson, the perk came after he had applied for the open city manager’s position in Grand Rapids, Michigan. Peterson, who earned a master’s in public administration from Western Michigan, has been in his current position since 2013. As reported by Solis, Peterson indicated that the student loan payments were an incentive for him to stay and that such “longevity pay” is “becoming more common for mid- to high-level municipal employees because of the pervasiveness of student debt.”
If you’re in a position to negotiate salary and benefits with your employer and still owe money on a student loan, it might be worth checking to see if they will participate in a program like the one offered by Fidelity.
If you’re struggling with bills in general and could use some financial counseling, a good place to start is the National Foundation for Credit Counseling (800-388-2227), the first and largest nonprofit in the nation dedicated to improving individuals’ financial health. In addition to advice on managing student loan debts, the NFCC also provides advice on mortgages, credit card debt and long-term financial planning. They can provide referrals to counselors in your area.
Read the full Michigan Subprime Report and check out the following reports on these related areas: