On Halloween 2023, Journalist, Kelly Bourdet, and Highway CEO, Mick MacLaverty, sat down for fireside chat about providing student loan support as an employee benefit, why it's needed and how to make it work.They discussed the importance of offering student loan repayment as an employee benefit, the major impacts of the student debt crisis, and how student loan repayment is a tangible way for companies to show they care about their employees’ financial well-being. The following is an excerpt from the conversation (some portions have been edited for clarity).
Kelly Bourdet: Amazing. All right. [...] Let me give everyone a little background here on Mick who I'll have this conversation with. So Mick is the CEO and co-founder of Highway Benefits, a company that helps employers offer student loan repayments and other educational assistance benefits to their employees. [...].
Mick MacLaverty: Thanks for having me. Excited to chat about all things student loans and help educate some folks.
Kelly Bourdet: Yeah, this is great. So first off, you know student loan debt, its forgiveness, its repayment has been in the news quite a bit over the past few years in particular. So I would love, with you and your knowledge base, maybe you can set the stage for everyone here. Just sort of like take us through what's the current status of student loan debt in America? And also how did we get here?
Mick MacLaverty: Yeah, absolutely. So the kind of basic statistics or figures that folks should probably know is we're approaching $1.8 trillion in student debt. There are about 45, 46 million Americans who have student debt, on average, holding between 4 and $500 payments a month, holding about $40,000 of debt. So this affects generally about a third of the workforce, given their 150 million people in the workforce. So as it pertains to employers thinking about, you know, what are their employees' financial responsibilities, student debt plays a massive role. So those are kind of the general high level statistics. With regard to why you're probably hearing so much about this in the news. Since March of 2020, student loans, federal student loans have been on pause. That ended October 1st. So over the last 30 days, loans have officially resumed for the first time in three years, and interest on those loans, which had also been paused, has resumed. So now you have, you know, 45, 46 million people facing their first four, $500 a month payments, some of whom have never had to make them because they graduated, you know, a year or two years ago.
Kelly Bourdet: Amazing. Yeah. Such a, such a current conversation for us to be having then. So one thing that I, you know, is mentioned in the summary of this panel is section 127 of the tax code and how this impacts student loan repayment and companies' abilities to offer this as a benefit. Do you want to walk us through what that section discusses, what it pertains to in general and also specifically to repayment?
Mick MacLaverty: Yeah, for sure. So a lot of folks are probably familiar with tuition assistance or educational assistance benefits within the workplace. So those are, you know, companies can basically cover tuition reimbursement up to $5,250. So that is what section 127 was initially started for. It's been around for 30-40 years. A lot of companies actually offer some sort of tuition reimbursement program. So Highway what we do, or one of our products, our kind of bread and butter product, is student loan repayment as a benefit. So as I mentioned on March 1st 2020, federal loans paused and interest on those loans paused. In addition to that pause, the federal government also stated through the CARES act that, what we do, student loan repayment as a benefit, was going to be lumped into section 127. So the government didn't just make some new kind of rule for us. What they did was say, “Okay, student loans are kind of a huge problem. Let's now make tuition reimbursement, which had already been tax free, let's make student loan repayment fall under that same bucket.” So now companies can actually contribute up to $5,250 tax free directly to their employees loans on a per employee per year basis. It's kind of the history of it.
Kelly Bourdet: That's great. And so you mentioned that $5,250 that had previously been what was allocated to tuition reimbursement. Is this now like–is it one or the other, or could a company offer that five thousand in reimbursement and the five thousand in repayment?
Mick MacLaverty: Yeah. So the company actually is allowed to choose, you know, how they allocate budget and they–you don't have to do $5250. It’s up to five–.
Kelly Bourdet: As the maximum.
Mick MacLaverty: Exactly. And so a company can roll out a program. And this is kind of what we do. And where we come into play is that the company allocates, you know, X amount of money per employee, per year or per month, and then employees can choose to either use it for continued education, for tuition reimbursement or for student loan repayment as a benefit. Funny or fun fact, I guess it's not even that fun, but the number 5250 stems from when they originally created this program for tuition reimbursement. That 5250 number was based on the cost of education at that time. So as you can see, the problem is exacerbating. And this kind of, you know, hasn't really changed. It's just kind of wild that back then, you know, 5250 could cover a lot of stuff. And now it certainly helps. But the number hasn't changed much.
Kelly Bourdet: Yeah. Well especially thinking about the average of 40K of debt that many folks are carrying when they enter the workforce. And so are there any rules around who can benefit, like who qualifies for this student loan repayment benefit on an employee level?
Mick MacLaverty: Yeah. So this in essence, it covers what are called qualified education loans. So these are student loans that one would take out in order to go to university college, community college, whatever it is. What it doesn't cover is kind of, those people who take out, like, a personal loan. Maybe if your grandparents say, I'll front you, you know, the 100 grand to go to school, and then you pay me back over time, that is not a qualified education loan. And again, that's kind of what we do at Highway is we ensure that the companies roll this out Compliantly, because we have integrations with the servicers that allow us to verify who holds and what is a qualified education loan.
Kelly Bourdet: Yeah. Well, okay. So let's move over a little more specifically to Highway and what y'all do. So first I mean I talked a little bit about you know, how you're very passionate about this topic. How did you come to care about student loan repayment? And how did you come to found this company?
Mick MacLaverty: Yeah. So it actually stemmed from my co-founder and i's master's thesis while we were in business school at UCLA. We were able to actually spend more or less two years researching the problem. So we interviewed, I think over like 130, or had like 130 hours of one on one interviews with heads of total rewards, benefits brokers, consultants, kind of the full gamut of people who would be involved or stakeholders who would be involved in student loan repayment as a benefit. And after all that research, we were basically so convinced by the idea that it would be successful because not only do companies win, employees win, servicers win. And the problem itself is so massive that we were just super compelled to start the business. And so after taking all that research and more or less putting kind of like, you know, one of those like old school 60 page business plans together, we kind of, you know, hit the road and we've been on the road ever since.
Kelly Bourdet: Amazing. And so let's walk through for everyone, kind of specifically the products and services that you offer and how you work with companies.
Mick MacLaverty: Absolutely. So again, our bread and butter product is student loan repayment as a benefit. So companies contribute directly to their employee student loans. It's tax free money for the employees meaning every dollar contributed goes right into their loan account. So you know, no income taxes or anything on that. And then it does reduce the taxable income of the business. So it is a very effective, we like to say it's a very effective, arguably the most effective compensation dollar you can give someone if they have student loans. So that is kind of our main product.
We do also offer tuition reimbursement products [and …] for employees who have a bunch of debt, a lot of tools for them to, in essence, get smart or get financially fit about their loans. [...A]t our core, as a business, you know, we help HR and people teams attract and retain the best talent through tangible benefits. That is what we want to do, starting with student loan repayment. Just because it's kind of such a broad, sweeping problem with such a massive amount of employees. But ultimately, you know, we do want to help employees get financially fit. And so that is kind of how we think about our different tools and products is to create things that employees will actually use and engage with, instead of just kind of checking a box.
Kelly Bourdet: Yeah. I mean, I feel like most people are highly motivated to look into any way that they can possibly lower that monthly payment on their loans. Yeah, I think.
Mick MacLaverty: There's, you know, especially now loans resumed for the first time on October 1st in three years. Employees are now kind of scrambling, trying to find any bit of information to educate themselves or get a little bit ahead. And so we view ourselves as kind of a hub to at least get them started and get on the right foot. Sorry.
Kelly Bourdet: Yeah. I mean, especially in those intervening three years, you know, inflation absolutely through the roof. So I'm sure a high level of sticker shock for anybody whose loan repayments just started back up this month. You know, one thing when we haven't been talking about student loan forgiveness, which is a different topic, but obviously something that, you know, most people here are probably familiar with the Supreme Court decisions. And, you know, Biden's push for that. And one pushback that you often read in the news was from folks who felt like student loan forgiveness was in some way very unfair to people who had already paid their loans back in full, you know, not not able to benefit from that forgiveness, given that, you know, as we already discussed, I think you said it's about a third of people in the workforce are carrying student loan debt. How do you sort of navigate that conversation with employers or help them navigate it with employees around this being some sort of a potentially unfair benefit that, you know, not everybody's going to be eligible for?
Mick MacLaverty: Yeah, a few things. One, I think not every benefit necessarily applies to every single person. And so in essence, what we want to do with student loan repayment is a benefit. The way we think about it is you're helping a population or part of your employee population that's kind of at a financial disadvantage. So we view this as a way to just get people's heads above water so they can start taking advantage of some of the other benefits, like retirement accounts or 401Ks, etcetera. So that's one thing. Another thing to note is in general, you know, we're not asking here for forgiveness. And this is not forgiveness. This is compensating employees in order to help attract and retain talent. So there is a good kind of balance of value for both the employer and the employee.
Additionally, companies we work with often roll out surveys that not only say, you know, would this be a good benefit for you, rank your different benefits and student loan repayment, you know, pops up because about a third of the workforce generally has it. Some other companies also in their surveys include things like, "would you want to be associated with this benefit, or would you want our company to provide this benefit?" Meaning, "is it a good thing? "
Student loan repayment is a benefit–A lot of people, you know, even if they don't have loans, acknowledge that this problem is so massive. I mean, a lot of these folks can't get out of debt. Like, will never get out of debt. And so if their employer can help play a little role, like, why not? Why wouldn't you want your organization to be associated with that? It kind of, you know, it shows, not just tells that you care as a company about your employees financial well-being. You know, just like offering mental health support to your employees or providing kind of fertility care to your employees, these are good things that your organization, you know, in an apolitical way, can kind of take a stance and say, we really do care about you as an employee and kind of the inputs of your life.
Kelly Bourdet: Yeah, I like that point, also about things like fertility care. You know, that's obviously not going to apply to everybody within a workforce. But you know, for those who do take advantage of it, a great thing to have. Um, so let's talk. You know, you've touched a little bit on sort of your value proposition to employers. Clear, I think, why employees would enjoy this benefit. But tell us about how you think through, like the main reasons why companies decide to offer student loan repayment as a benefit.
Mick MacLaverty: Yeah, sure. So we acknowledge that every company has their own priorities, right? And so in general, when companies reach out to Highway or companies that want to engage with student loan repayment, in general we this is generalizing. But they kind of do break down into two different buckets. Bucket One would be those who are trying to create an attractive work environment or workforce, so really focused on attracting talent. The other would be those who are kind of focused on retaining talent. They work in a kind of a high churn environment.
On the attraction side, you know, only nine-ish percent of companies currently offer student loan repayment as a benefit. So it's a very good, easy win way to stand out in a recruiting conversation. You know, when company A and company B are put next to each other and an employee is looking through things beyond salary bonus, and, you know, it's an early stage company, you know, equity in the business, you know, what are the other benefits that matter. And student loan repayment. I mean, it's tax free income into generally what would be your largest personal liability. So it kind of stands out front and center.
So on the attraction side, I think it kind of speaks for itself. On the retention side, we also acknowledge no two companies are alike in how they should or would want to roll out this program so companies can actually choose, you know, how much they want to contribute per employee per month. Maybe you can institute tenure rules. So if you've been at the company for one year, you get 100 bucks a month. If you've been there for three years, you get the maximum benefit, really kind of creating an environment that encourages employees to stay and provides, you know, a financial incentive to do that in a tax free way.
So that was a very long winded way of answering your question. But in essence, like, you know, if you have attraction and attraction is a top priority, there are ways that this benefit can help. If you're focused on retention as a company, there are other ways that we can help. You know, work with you to provide your goals, because that's ultimately what we do is help companies achieve their kind of people goals through student loan repayment as a benefit.
Kelly Bourdet: Yeah. And, you know, everyone on this call is an HR professional. So, you know, I'd love to talk a little bit more specifically about what does onboarding look like for a company that is interested in this benefit? How do they work with you sort of like on a daily or monthly basis.
Mick MacLaverty: So getting back to. When we started this company, my co-founder and I did all this research, and we had a theme of questions that we asked different stakeholders. One of the kind of resounding themes across pretty much everyone we talked to. And we said, what would you like to see in software? Like what do you want to see? And the ultimate response was, we don't want to deal with this basically ever. Anything that makes my life easier. And I don't have to add on another task during the week or day. That is something I'm interested in. So that's been in the back of our mind or in the front of our minds as we continue to build out new products. So onboarding with Highway is, you know, outrageously easy. We've, you know, onboarded companies on the same day. [...]
Mick and Kelly go on to discuss Highway’s services and products, customer success stories, comparisons of student loan repayment to the 401K, and common objections to the benefit in more depth. They also tackle Q&A questions from HR professionals at the end. Watch the webinar recording above for the full conversation.