FCA US joins those stepping up to help employees pay student loans

A "Saturday Night Live" sketch in January generated plenty of laughs with a fake game show called "Millennial Millions" where twenty-somethings compete for prizes, such as a chance to pay off their big student loans. 

But employers are increasingly recognizing that $35,000 or more in student loan debt is a serious matter that is stressing out many workers. 

"We're finding that more and more employees are entering the workforce with more college debt," said Maria Darbonne, manager of savings plans for Fiat Chrysler Automobiles. 

"We know it's overwhelming." 

So as we enter 2019, expect to hear more about financial wellness — including finding ways to help debt-burdened employees recover from an increasingly common financial headache. 

One of the latest moves: Auburn Hills-based FCA US began partnering this year with CommonBond for Business to offer a way for salaried employees to easily refinance their student loan debt. Current fixed rates in late January ranged from 3.67 percent to 7.25 percent; variable rates ranged from 2.61 percent to 7.35 percent.

The automaker — whose brands include Ram Trucks, Jeep and Dodge — said it wants to help employees tackle their student debt so they're better able to save for other things, such as a new home and retirement. 

Many salaried employees have more advanced degrees and an even bigger student loan debt burden than others, Darbonne said. 

Within the first two weeks of the program at FCA US, she said, 243 employees started the process to apply to refinance their student loans, which totaled $10 million. 

So far, she said, 24 employees have been approved for refinancing their student loans, totaling more than $1 million. We're looking at a rough average of $42,000 of student loan debt per employee for those who already refinanced. 

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Darbornne said the student loan refinancing program is part of its "Financial Fitness" initiative at the automaker to offer employees more online tools and resources on things like how to budget or save more money in the 401(k) retirement plan.

While many people can refinance their student loans through a variety of banks or student loan refinancing companies, often inertia takes hold and people don't do anything.

"It's easy to put off the decision when you don't know what to do," Darbonne said.

Darbonne, who has a daughter attending Michigan State University, noted that she spotted about 10 commercials pushing ways to consolidate debt, including how to tackle student loans, during a televised MSU football game last fall.

While the financial firms knew their target market, sometimes those burdened by debt don't do anything because they have so many options they don't know where to even start.  

Employers say student loan debt — which has hit $1.5 trillion — can cause young consumers to delay buying a home, setting aside savings for retirement or even thinking about buying a new car. 

About 20.3 percent of student loan borrowers in the Detroit area have been delinquent at least once on their loan payment, defined as 90 days late or more, according to a report by Student Loan Hero. Paying your loans late can hurt your credit score — ultimately making it more costly to take out a mortgage or a car loan. 

Another statistic: Nationally, 11.3 percent of borrowers in a repayment status in the federal direct loan program are in a serious delinquency, according to Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com.  This is based on data published by the U.S. Department of Education.

Companies are adding programs to the mix of benefits as a way to address student loan debt.

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General Motors, for example, has an exclusive low-interest rate offer for employees to refinance student debt, through online lender SoFi. The program, which began in 2016, can be extended to family members, as well.

Dearborn-based Carhartt will pay $50 a month up to $10,000 to help its eligible part-time and full-time workers worry a little less about their student loan debt. Employees have to be with the company at least 30 days, if non-union, or 90 days, if in a job represented by a union. Carhartt said that so far 225 associates have enrolled in the program since June. The company's total contributions were $77,000 since June. 

Tara Fung, vice president for CommonBond for Business, said about 300 companies are working with CommonBond in one fashion or another to help employees deal with the student loan burden.

"They want to be able to attract talent," Fung said. "They want to be able to retain talent."

Those burdened by college debt, though, need to realize that they should still research their own options given the complex nature of private and federal student loans. 

"Borrowers who are thinking of refinancing their student loans should definitely shop around, to find the lowest interest rate," Kantrowtiz said.

"Just because an offer comes through your employer as an 'employee benefit' doesn't mean you can't find a lower interest rate through another lender," Kantrowitz said.

Not everyone will qualify for the ultra-low rates and you need to be cautious about how you view some promises. 

In late October, for example, the Federal Trade Commission reached a settlement with the online company, Social Finance and its subsidiary SoFi Lending Corp., where the company agreed to stop misrepresenting how much money student loan borrowers have saved or will save from refinancing their loans. 

According to the FTC, one online SoFi ad claimed: “Refinancing student loans saves $22,359 on average.” Another ad said: “Start saving on your student loans. Average monthly savings $292.”

The FTC alleges that the average savings SoFi touted in its ads inflated the actual average savings — sometimes even doubling it — by excluding large categories of consumers.

If you refinance and agree to pay the loan over a longer term, you could pay more in total than if you had not refinanced. 

"Those borrowers therefore would usually end up paying more money — thousands of dollars more, on average — over the lifetime of the loans," the FTC charged.

As part of its announcement, the FTC said it was notifying lenders making similar savings claims and recommending that those companies review their advertising to ensure that they are not making false or unsubstantiated representations.

It's important to carefully review your own numbers.  

CommonBond notes online, for example, that the interest rate for a refinance loan depends on several factors, including your credit profile, income, your choice of a variable or fixed rate, and the length of repayment for the loan. 

In general, Kantrowitz said, it is best for borrowers who want to refinance student debt to apply for several loans, to see the actual interest rates for which they are eligible. Credit bureaus no longer ding student loan borrowers extra when they apply for multiple loans, he said, when it is clear that they are shopping around.

Kantrowtiz noted that its important that you don't confuse variable rates with fixed rates. A variable rate can go up — or down — over time. 

Pay extra close attention if your original student loans involved a co-signer. If so, the student borrower has to beat their own previous credit score — and that credit score of the co-signer — in order to qualify for a lower rate on a refinanced loan, if they will be refinancing without a co-signer, he said. 

You also want to carefully reconsider refinancing federal loans into private student loans, as this will cause you to lose the superior benefits, such as the opportunity to lower monthly payments with income-driven repayment plans, that are available with federal student loans, Kantrowitz said.

He noted that the fixed interest rate on the federal student loans is usually lower than the interest rate on private student loans. 

Fung at CommonBond said some people who are in higher paying jobs may not be as concerned about using one of the income-driven repayment plans offered under federal student loan programs, and as a result some could benefit from refinancing to a lower rate, too. 

"Each person with student debt is different," she said.

Sure, it's fun to dream of winning some game show that pays off all that debt. But it's more realistic to research the options and consider if refinancing a student loan might actually save you some money. Make sure to ask potential employers if they're offering any student-loan related benefits, too.  

Contact Susan Tompor: stompor@freepress.com or 313-222-8876. Follow Susan on Twitter @Tompor.