Student loan benefits have long been placed alongside pet insurance and gym memberships in the “perks” category, and it’s understandable. For a long time, paying down an employee’s student debt directly was the only way to help employees burdened with debt, which is a pretty expensive perk. And with student loan payments paused for the last few years, employees were experiencing relief from payments, so student loan benefits weren’t really a must-have.
But today, with payments resumed as of October 2023, and recent policy changes that make it more attractive and more economically feasible to offer student loan related benefits, HR leaders are waking up to the idea that student loan benefits aren’t just nice-to-have. They’re an incredible talent acquisition and retention tool, and a true benefit that sits firmly alongside healthcare and 401(k)s.
Today, we’re announcing Summer raised $9M in funding to help companies ranging from Fortune 500s to government municipalities take advantage of the myriad options available to employees who are saddled with student loan debt. The round was led by Rebalance Capital and SemperVirens, with participation from General Catalyst, QED, Flourish Ventures, Partnership Fund for NYC, Fenway Summer, and Gaingels. With this infusion of capital, we’re focused on expanding our leadership team, growing our CHRO Advisory Board, and continuing to develop technology that makes it simple to implement a range of student loan benefits, from Student Loan Retirement Matching, to Tuition Assistance, to enrollment in Public Service Loan Forgiveness and other free, federal programs.
There’s so much more to student loan benefits than meets the eye, and with this fundraise, we’re poised to deliver on this category’s untapped potential.
The State of Student Loan Benefits
Student loans are a pressing concern for employees at all companies, and at all income levels, as this debt impacts their ability to achieve other financial goals. Even when student loan payments were paused, 38% of student loan debt holders reported they delayed saving for retirement due to the burden of that debt. Now, with payments resumed, nearly three-quarters of employees expect that payments will impact their ability to save for retirement. And these financial concerns impact employers: a recent study by the ADP Research Institute reports that about half of workers are in the process of leaving their workplace, and among workers with student loan debt, that number increases to nearly 60%.
Employees are looking to their employers to help. In fact, 86% of employees ages 22 to 33 would commit to a company for five years or more if they helped to pay off their student loans. Even if employers don’t offer repayment programs, providing guidance can help them stand apart: 85% of millennial employees say they want to see financial planning and educational workshops from their employers.
What a lot of HR leaders are still catching on to is that there are so many ways to help ease the financial stress of student loans and boost retention –– direct contribution is what most think of, but it’s only one option.
Thanks to three major updates, there are now a whole host of options to help employees with student loans, and the cost of offering these benefits ranges greatly too.
- SECURE 2.0: Secure 2.0 enables all employers with retirement plans to help their employees tackle two major financial goals simultaneously: paying off student loans and saving for retirement. The student loan matching provision, which took effect in January 2024, allows employers to match their employees’ qualifying monthly student loan payments with tax-favorable contributions to their retirement plans.
- Tax-advantaged contributions: The CARES Act includes a provision that makes it highly cost-effective for employers to help employees tackle their student debt. Thanks to the bill, employers can now pay up to $5,250 tax-free towards employees’ student loans via student loan contributions and tuition reimbursement. Previously, only tuition reimbursement received such favorable tax treatment.
- Public Service Loan Forgiveness and IDR Plans: Nonprofit employers are in a unique position to help their employees on their financial journey, and that’s thanks to PSLF, but even private employers can help employees enroll in Income-Driven Repayment programs. Helping employees navigate these programs with ease and at-scale is one of the most cost-effective ways to have an impact on their financial wellness and boost retention.
Summer is the only end-to-end student loan solution that helps employers navigate these options and then roll them out to their employees at-scale. In fact, we save employees an average of $40k and our partnership is proven to reduce turnover by 20%. As a Certified B Corporation, Summer has partnered with leading employers, unions, and governments across the United States to generate over $1.5 BILLION in savings. And we’re just getting started.
What’s Next
There’s a lot of work to be done in bringing these benefits to HR leaders and the employees they serve, which is why we’re announcing our CHRO Advisory Board, made up of HR and technical leaders from ADP, TIAA, Mattel, DIRECTV, and Gilead. This Advisory Board will work hand-in-hand with the Summer team to help simplify what is ultimately a very complex set of policies and resulting benefits, and work alongside Summer to ensure we’re delivering best-in-class solutions to the HR leaders who need them.
We’re also gearing up for consolidation in this space, and this new round of funding will make it possible for Summer to execute on potential acquisitions, so we can combine our already robust technical solution for student loan benefits with other related benefits platforms.
Speaking of technical prowess, we’ll use this round of funding to continue to develop our platform, which makes it possible to roll out these benefits to employees at a grand scale. The funding will also help ensure we’re developing our leadership team in a way that reflects the ambition of Summer’s mission. We recently added Dan Macklin, co-founder of SoFi, as President.
We couldn’t be more excited for what’s ahead, not just for Summer, but for this whole category as we undergo a massive shift in how the industry thinks about benefits. If you’re an employer looking to offer this exciting category of benefits to your employees, let’s chat. Missing out on the opportunity to to adopt student loan benefits now might mean missing out on amazing talent later!
