Panel Discusses Student Loan Debt Gamechanger
As student loan debt climbs to unheard-of heights ($1.5 trillion ), a study by the Center for Retirement Research at Boston College shows that graduates with student debt are saving only half as much for retirement as students without debt.
On the other hand, companies can struggle to recruit and retain top talent—and that’s another big problem.
A private letter ruling from the IRS , though, has people all across the country—from consultants to lawyers to industry execs to government officials, all the way to Congress—buzzing about a solution with the potential to help solve both problems.
At a high level, Chicago-based company Abbott Laboratories created a program to help their employees with student debt repayments and also save for retirement.
Because their program didn’t fit within current tax codes for benefits, they requested and received permission from the IRS to implement their groundbreaking program.
This voluntary benefit:
• Allows the company to provide non-elective funds (“matching” funds) to an employee’s 401(k) NOT because the employee contributed to it, BUT because he or she used at least 2% of his or her income for student loan repayment purposes
• Means that, if the employee meets the 2% student loan repayment benchmark, then Abbott will contribute 5% to that person’s 401(k) plan
• Implies, in a sense, that these employees can have their cake and eat it, too, as they are paying down their student loan debt AND receiving corresponding pre-tax dollars in their retirement funds
This dovetails perfectly with what we, at SoFi, have been pushing so hard for—creative, substantial help for student loan debt.
We facilitated a live-streamed panel featuring guests with knowledge about how companies, consultants and government officials are currently trying to tackle student loan debt.
Our goal is to help company executives and human resource directors brainstorm about what they can do to create their own student loan/retirement planning win/win scenarios.
Through creative benefits like the one by Abbott, someday companies could:
• Offer one of the hottest benefits around to employees
• Use this benefit to help recruit star talent
• Retain these superstars; after all, why would they want to give up a benefit tailormade for their own financial wellness?
• Benefit from amazing positive press like Abbott has received
Note that Abbott was granted permission to offer this program through a private ruling from the IRS. The panel in our video share how this does not automatically grant blanket permission for all companies to offer this type of program, but it may open the door.
Depending upon your own risk tolerance, our guests say you could:
• Create a program and ask for your own private ruling approval from the IRS (figure this to take six to nine months)
• Push for or wait for the IRS to expand the scope of this ruling or for legislature to come from another governmental body; figure this may take a couple of years to happen. Specifically, you can push for this as an employer by writing to your state legislators and asking them to support tax efficiency for student loan contribution benefits.
• Implement a student loan contribution benefit that doesn’t require a Private Letter Ruling. For example, some companies also offer student loan or 529 college savings plans that don’t require a separate ruling.
Check out this video to understand why we’re so excited about this possibility, as well as to get an outstanding overview of the challenges and opportunities existing today.
If you’re a company exec or human resource professional who is already pushing to develop win/win student loan repayment benefits, we applaud you and would love to have a conversation about your initiatives.
If you’re not yet developing these kinds of programs, we invite you to join the conversation. A place for you exists at our table, today, tomorrow—and until we solve this problem, and then even beyond that.
If you’re an employee with student loan debt, we need your voice heard, too. Whenever you have a good opportunity, whether through company surveys or some other way entirely, let it be known that student loan repayment benefits, especially those that also help with retirement savings, would grab your attention and hold onto it tightly.
Finally, a huge thanks goes out to:
• David Amendola, Director & NA Intellectual Capital Leader | Benefits Advisory & Compliance at Willis Towers Watson
• Kyle Healy, VP, Corporate Development at NFP
• Nat Hoopes, Executive Director at Marketplace Lending Association
• Rob Lavet, General Counsel at SoFi
Each of these men has been extraordinarily generous with his time, talent, knowledge and expertise.
Check Out SoFi at Work
From all of us at SoFi to all of you: Let’s make this happen!
SoFi At Work partners with companies, many similar to yours, to provide student loan benefits. Our contribution platform allows employer partners to customize contribution benefits to fit their recruitment and retention needs.
We can help you design a plan that works for your company, whether that’s direct payment to your employee’s student loans or implementing a plan with similarities to the Abbott approach.
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.