SoFi Blog

Tips and news—
for your financial moves.

How Leading Organizations are Preparing Their Workforce for the Financial Cliff of Repayment

How Leading Organizations Are Preparing Their Workforces for the Financial Cliff of Repayment

Major organizations are gearing up to help their employees with the challenge of what’s sometimes called the student loan repayment cliff. In February 2022, 40 million borrowers will be facing the return of monthly student loan bills after a 22-month pause. Knowing the importance of helping employees have a smooth transition back into repayment and maintain good financial posture, many employers want to make sure their workforces are ready.

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, payments for federal student loans owned by the Department of Education were suspended and interest rates for those loans were set to 0%. Although the pause was originally set to expire in September, 2021, the government announced a final extension of the pause on student loan repayment, interest, and collections through January 2022. Fortunately, a provision that was also introduced in the CARES Act (and that has also been extended via more recent legislation) sets employers up to ease this transition by letting them contribute $5,250 annually per employee on a tax-exempt basis toward tuition reimbursement or student loan payments through 2025. To maximize the value of this benefit, employees also benefit from zero tax liability on contributions made by their employer toward educational assistance programs (up to $5,250) under Section 127 of the Internal Revenue Code.

About 8% of large companies offered student loan repayment benefits before the pandemic and some believe many more have implemented or are considering the benefit in light of the tax status change.

More generally, helping with student debt, and specifically the coming payment cliff, is a vital part of the trend toward offering financial wellness programs that reach beyond retirement savings to build financial security in all areas of an employee’s life.

More and more organizations are taking a broad approach to financial wellness. A majority of employers (62%) feel extremely responsible for their employees’ financial wellness, compared to 13% in 2013, according to Bank of America’s 2020 survey of 808 employers that sponsor 401(k) plans. Among the top benefits listed were help with budgeting and debt management, both important resources for employees facing the student loan cliff.

Here’s a closer look at how a handful of large employers are situated to help their employees face the restart of student loan payments.

Abbott


The healthcare company Abbott may have paved the way for a creative, effective way to help employees who are saddled with college debt continue their retirement savings. Like many companies, Abbott noticed that employees struggling to pay back loans can’t afford to contribute to 401(k) and other retirement savings. So, Abbott started its Freedom 2 Save program, which allows employees with student loans to divert the 2% minimum contribution they would need to contribute to their 401(k)s to receive Abbott’s 5% match to paying off student loans.

This benefit has led to the so-called Abbott rule. The IRS issued the company a private letter ruling allowing the unorthodox 401(k) match. Since then, a handful of companies have evaluated the practice. But many other employers may rush to adopt this benefit if, as expected, Congress passes The Securing a Strong Retirement Act (SSRA). Among other things, the Act would fully authorize 401(k) matching contributions as part of a student loan repayment benefit.
Abbott reports that employees who have signed up for their match benefit range in age from early 20s to 60s. The average amount of student loan debt is $38,000, with the highest amount being $300,000.

Aetna


The health insurance giant began supporting employees with student debt back in 2016, making it an early adopter. Aetna matches student loan payments up to $2,000 with a lifetime maximum of $10,000. Aetna differs from many other employers offering this benefit in that the company includes part-time employees in the program, providing them with half the amount of payment relief that it gives to full-time employees.

Google


The tech heavyweight joined the student loan repayment benefit bandwagon in the wake of the pandemic. Starting this year, the company will match up to $2,500 a year per full-time employee, adding to the company’s existing tuition reimbursement program.

Student loan support helps Google attract talent at a time when its legendary in-office perks carry less weight with its increasingly remote workforce. It also adds to the company’s diversity, equity, and inclusion efforts. John Casey, Google’s director of Global Benefits explained the relationship between the program and the company’s goals in a company blog post , “Though student loan debt is an issue globally, Americans in particular face an enormous student loan deficit—$1.5 trillion dollars, twice what it was a decade ago. This burden disproportionately affects women and communities of color: For example, on average Black college graduates have $25,000 more in student debt than white graduates four years after completing a bachelor’s degree.” Google also announced it expects to expand the program globally.

New York Life


Another company with one of the more established student loan payment benefits, New York Life pays up to $10,200 over five years for an eligible employee’s college debt. Importantly, the program also strongly encourages employees to use the student loan advice and online planning tools the company offers, including financial planning counseling, its student loan calculator, and information on how to qualify for a mortgage while carrying student debt and other education efforts.

NVIDIA


Visual computing company NVIDIA may be one of the most generous employers offering student loan payment assistance, although only recent grads are eligible. Full- and part-time employees who have been at the company at least three months and have graduated within the past three years can receive up to $500 a month for a maximum total of $6,000 each year, with a lifetime maximum of $30,000. (If the required monthly payment on a student loan is less than $500 a month, NVIDIA makes the total payment.) In addition, NVIDIA offers student loan refinancing customized applications (through SoFi).

PwC


Accounting and professional services firm PwC is also one of the first companies to offer student loan repayment. The company pays $1,200 per year for up to six years. PwC offers the benefit to associates and senior associates. If an employee is promoted to management, access to the benefit ends. Back in 2019, the company reported that minority groups are more likely to sign up for student loan repayment, with 62% of black employees and 52% of Latino employees opting in, compared to 47% percent of white employees and 22% of Asian American employees.

The Takeaway


Here at SoFi, we conducted a survey to learn more about the benefits employees want. We discovered that 90% of respondents would be more inclined to accept a position at a company that helps them pay off student loans. So, we joined the growing number of companies that offer student loan repayment to employees, offering $200 a month in loan reimbursement.

SoFi at Work can help you help your employees manage student debt with SoFi’s Employer Student Loan Repayment Program and Student Loan Refinancing. The latter allows eligible federal student loan borrowers to lock in today’s low interest rate and continue to benefit from the federal moratorium on repayment. The refinanced loan would be disbursed on December 20, 2021 with the first payment due in February, 2022. (Please note: Interest will begin accruing on disbursement, shortening the 0% interest period.) While refinancing federal student loans with a private lender excludes them from federal benefits and protections like income-driven repayment plans and loan forgiveness, some borrowers may opt to refinance depending on their personal financial situation and goals.

Learn More

Photo credit: iStock/Ivan-balvan


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi at Work is offered by Social Finance Inc. SoFi loans are offered by SoFi Lending Corp. or an Affiliate (dba SoFi), licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 www.nmlsconsumeraccess.org . The Student Debt Navigator tool and 529 Savings and Selection tool are provided by SoFi Wealth, LLC, an SEC Registered Investment Advisor. For additional product-specific legal and licensing information, see https://sofi.com/legal.
SOBD072105

Read more
TLS 1.2 Encrypted
Equal Housing Lender