Companies are often searching for unique ways to attract top employees. And while free snacks or a game room have a certain appeal, they might not be enough. More and more organizations are starting to offer a student loan repayment benefit, in addition to standard health care or retirement benefits.
While few companies currently offer student debt assistance, highlighting the benefits for your employer might help you make a more persuasive argument for a student loan repayment program at your company.
Understanding Employer Student Loan Repayment
What is an employer student loan repayment program? Getting an employer to match all of the money you pay for your student debt may seem like a far-fetched dream, but it’s certainly possible to start a program with at least some amount of annual reimbursement at your company.
Benefits tied to student loan debt repayment assistance don’t have to just be for your younger employees. While student loans are likely the priority for those just entering the workforce and looking for new jobs, older workers might still be paying off their outstanding loans—or loans they took out for their child’s tuition.
If a business owner wants to help their employees in debt, they might consider raising someone’s compensation based on current debt payments.
However, one way companies are trying to alleviate their employee’s student loan debt burden is by offering them a match, up to a certain amount, on payments they make toward their student loans every year.
Employers make a regular contribution to your student loan balance, say $100 a month for example, while you continue to make regular payments.
You can save money this way on your balance and interest for the loan. But keep in mind that unlike tuition reimbursement benefits from an employer, which are usually tax-free, employer’s loan contributions are considered taxable income.
There are a number of services available to companies who are looking to manage this kind of benefit. Just like the companies designed to help your HR department manage other benefits like health care, financial institutions can help to assist with student loan repayment plans.
Companies with Student Loan Repayment Benefits
To get a sense of what kinds of programs different employers are offering when considering student loan repayment as a benefit, here are several examples of companies who have already started this new incentive:
• Chegg, the education technology company best known for online textbook rentals, offers its employees $1,000 annually toward student loan debt.
• Estée Lauder, the cosmetics company, launched their student loan benefit program this year, by offering $100 monthly for payback, with a cap of $10,000 total.
• Fidelity, the brokerage firm, follows a similar program by offering newer employees below a certain title $2,000 per year, up to $10,000 for student loan repayment matching.
• Live Nation, entertainment and events, will contribute $100 monthly to student loans, maxing out at $6,000 in repayment.
• Penguin Random House, the book publisher, currently will reimburse up to $1,200 yearly for student loans, for a full-time employee who has been with the company at least one year.
• PwC, also in the financial services industry, also offers $1,200 annually, up to $10,000 total for student loan payments.
• SoFi offers one of the more unique employer student loan programs on the market, offering $200 a month in reimbursement with no cap.
According to the Society for Human Resource Management, only 4% of companies of companies currently offer some kind of student loan repayment program or benefit, so there is room to grow. Implementing a student loan repayment program with a matching contribution will depend on your company’s size and resources.
But this kind of incentive can appeal to potential new employees. Most companies do not require employees who leave the organization to repay the benefit. Paid out monthly, it can really help with the most burdensome student loan payments, which some employees might find more valuable than, say, a year-end bonus.
Save on Student Debt while Saving for Retirement
Helping employees pay down student loan debt, while also still saving for retirement, is a benefit that could really increase the appeal of an employer loan repayment program.
The IRS recently cleared a path for employers to create a different kind of student loan payoff program that could help attract employees. The program was created by Abbott Laboratories, but companies of all sizes could use a similar approach.
The IRS allowed Abbott to help its employees save for retirement and pay down student debt, with a new program that allows people who direct a certain amount of their paycheck to pay off student loans to also get a contribution from Abbott for their retirement accounts.
Abbott’s program is unique but could lead to more employers implementing similar programs, where the company can make a tax-free contribution to the employee’s 401(k), on the condition the employee makes student loan payments.
Making The Most of Student Loan Repayment
If your company does offer a benefit around student loan repayment, or you are thinking of starting such a program at your organization, make sure you set yourself up for the maximum amount of success by paying off your student loans smartly.
It might be time to evaluate your current payment plan and see if switching to an income-driven repayment plan or consolidating your loans could make your monthly loan payments more manageable.
Just like a 401(k) retirement match, a company that offers a student loan repayment program is basically offering you extra money—don’t miss out on that opportunity by not taking advantage of the program if it is offered at your workplace. For many employees, even an extra $100 a month for could be enough to help them get out of debt faster and feel more confident about their financial security.
To tackle student loans even further, you could consider refinancing your student loans through a private lender, such as SoFi. Refinancing gives you the chance to combine multiple student loans—federal or private— into a single loan with one monthly payment. And refinancing can potentially lower your overall interest rate or give you access to more favorable loan terms.
Though, on the other hand, refinancing with a private lender means forfeiting access to federal loan benefits like income-driven repayment plans. Nonetheless, if your credit score and earnings have improved since graduating from college, refinancing might be a smart way to pay less in interest with a lower interest rate and a shorter repayment term.
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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.
SoFi Student Loan Refinance
IF YOU ARE SEEKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE STRONGLY CONSIDER THE MARCH 2020 LEGISLATION THAT SUSPENDS THE OBLIGATION TO MAKE PAYMENTS ON MOST FEDERAL STUDENT LOANS UNTIL SEPTEMBER 30, 2020. THE SOFI REFINANCE LOAN DOES NOT HAVE THIS FEATURE. 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.