Student management

Assistance with student loan payments: the most attractive benefit for new jobs

Now that the White House has unveiled its student loan forgiveness program and announced the latest payment pause extension, borrowers have a clearer picture of the financial burden they face.

President Joe Biden’s plan cancels $10,000 of debt for people earning less than $125,000 a year (or $20,000 if they have a federal Pell grant).

That should wipe out the balances of nearly a third of the 45 million Americans who currently hold federal student loans, but many borrowers will still head into 2023 under a cloud of debt.

Help may come from an unexpected source: their bosses. A growing number of employers are offering student loan assistance as a social benefit to attract — and keep — top talent.

More than half of workers think employers should help pay off student debt

Kristen Carlisle is managing director of Betterment at Work, which offers student loan management resources in addition to traditional 401(k) services. Carlisle said the number of companies offering student loans is growing.

“It’s becoming more and more common — not just among Fortune 500 companies, but also among medium and small businesses,” Carlisle told CNET. “Employees demand it. Bottom-up demand shapes the narrative.”

Betterment is one of the few companies to offer student loan delivery solutions, alongside SoFi at Work, Gradifi, and Tuition.io.

According to research by Betterment, 57% of employees think their boss should help them pay off their student debt. And 85% said they would leave their current job for a company that offered more financial support for student loans.

“Employees have more influence than ever, so employers are racing to stay competitive,” Carlyle said. “New entrants to the labor market have new needs and the market must respond to them.”

How do companies help their employees with their student loans?

There are a range of options for companies looking to provide student loan assistance, from financial counseling and debt consolidation to matching payments similar to tuition reimbursement.

There’s no one-size-fits-all solution, Carlyle said, and it’s worth inquiring about student debt offers from a potential employer.

Which Companies Offer Student Loan Benefits?

Google offices in New York

As of 2020. Google pays up to $2,500 per year towards employee student loan repayments.

SEE Press/Getty Images

The number of companies offering student loans is small but growing and contains some notable names: Since 2016, Aetna has equalized student loan payments up to $2,000 per year for full-time employees, with a maximum at $10,000 life.

Estée Lauder, Peloton, Live Nation and Staples will all pay out $100 per month for your student loans, with varying caps on dollar amounts and length of involvement.

Working with Gradifi, Carvana contributes up to $1,000 per year to repay student loans for full-time employees, while Google began matching employee student loan payments in 2020, up to $2,500 per year. year.

Benefits provider Goodly has a searchable database of employers who offer student loan assistance, as does remote job listing site Flexjobs.

Some employers, such as Google, attach no conditions to the benefit. Others have certain stipulations, such as a minimum working time. Yet 86% of workers said they would stay with a company for five years if it meant being able to take advantage of a student loan repayment program.

Employees aren’t shy about having candid conversations with their bosses about their student loan burden, Carlyle said.

“Providing information to your employer and your benefits provider can only help you achieve financial freedom,” Carlyle said. “Go to your People team and ask them if they’re thinking about it. Explain why it could help the whole business and maybe come to the table with names of vendors.”

What is the scope of student loan assistance as a professional benefit?

Craig Copeland, director of wealth benefits research for the nonprofit Benefits Research Institute, said there was major interest in student loan benefits before the pandemic.

“COVID has put everything on hold, with companies focusing on emergencies and healthcare,” Copeland told CNET. “Now the attention is coming back.”

Adoption is still slow and legislation is only now coming that makes it easier for businesses to provide student loan repayment assistance, he said.

From 2014 to 2016, just 4% of companies offered such benefits, according to the Society for Human Resource Management, a figure that doubled to 8% in 2019.

Tuition reimbursement remains a much more common benefit, offered by 71% of employers according to US News & World Report data. This is largely because, until recently, student loan assistance did not qualify for tax relief the way tuition refunds do.

Legislative changes in favor of student loan assistance

The CARES (Coronavirus Aid, Relief, and Economic Security) Act of 2020 finally allowed employers to make untaxed contributions of up to $5,250 a year to employee student loans — a benefit that has since been extended until in 2025.

However, only 8% of employers offered it in 2020.

The SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 allows workers to create 529 tax-advantaged accounts of up to $10,000 per year for student loan repayment. But, according to the Society for Human Resource Management, only one in 10 employers offer these accounts – and only one in 100 contributed in 2020.

Now before Congress, SECURE Act 2.0 would finally change financial regulations to allow employers to make tax-free 401(k) contributions that directly match their workers’ student loan repayments.

Passing SECURE Act 2.0 would allow people whose student debt prevents them from putting aside money for retirement to start saving, said Laurel Taylor, CEO of Candidly, which offers student debt solutions.

“Debt-ridden college grads have on average half the 401(k) balance of their debt-free colleagues because they’re forced to delay saving,” Taylor told SHRM. “That would correct that inequality.”

SHRM expects “a surge” in employers offering the benefit, according to its 2020 Employee Benefits Report. In a labor market that favors workers, this can be a way for employers to stand out.

“The educational benefits are ripe for expansion, as employers could see real benefits in talent acquisition and retention by being early adopters of these relatively rare but popular offerings,” the report said.

Nearly half (48%) of employers were offering student loan assistance or planning within the next two years, according to an October 2021 survey of 250 companies by EBRI.

Of course, not all workers have student loans, and financial education benefits can take many forms.

“It could be a college savings account for employees who are parents,” Copeland said.

What to Keep in Mind About Student Loan Assistance Benefits

Currently, student debt consolidation plans are the most common benefit, primarily because they do not require employers to make ongoing contributions.

“You’ll probably get a better interest rate,” Copeland said, referring to debt consolidation. “The downside is that your loan will be privatized,” making it ineligible for any future suspension of payments or debt forgiveness by the federal government.

“You just have to understand what you’re getting into,” Copeland added.