To attract and retain young workers, more and more companies are offering another type of employee benefit: student loan repayment assistance.
Employers typically provide employees with a fixed monthly amount – usually around $100 per month – to help pay student loan bills. These payments are usually sent directly to the employee’s loan manager.
Since PricewaterhouseCoopers made headlines in September 2015 with its announcement to offer this benefit to its full-time employees, hundreds of other companies and different types of businesses have followed suit, rolling out loan repayment benefits. similar students for employees nationwide.
“Pricewater has definitely set a benchmark there with [offering] $100 a month,” since many other companies have adapted it as the standard rate for student loan repayment assistance, says Meera Oliva, chief marketing officer of Gradifi, a subsidiary of First Republic Bank that manages repayment benefits. student loans for employers. Gradifi has over 400 clients who offer student loans, including PwC, Honeywell International Inc. and Penguin Random House.
Labor experts say this type of benefit acts as a recruiting tool to attract young talent, especially since many recent graduates applying for entry-level jobs struggle with a student debt. According to survey data from US News, the average 2016 college graduate who took out loans to pay for their education graduated with nearly $29,000 in student debt.
In fact, most employees – 78% – say they would be more likely to accept a job offer if it included student loan repayment benefits, according to a recent CommonBond report that surveyed more than 1,500 older employees. 22 years and over. The survey also found that 87% of employees aged 22 to 34 would be more willing to stay in their current job if it offered student loan repayment benefits.
For recent college grads and millennials looking to land a job that offers student loan repayment assistance, here are some things to keep in mind.
Expect more companies and different types of employers to add this benefit. Although student loan repayment benefits were initially popular among large corporations, other types of employers, including nonprofits and municipalities, offer this benefit. The city of Memphis, Tennessee, for example, now offers its full-time employees help with student loan repayments.
Benefits enrollment experts expect employers to embrace the benefit faster than they did tax-advantaged 401(k) retirement accounts, which were introduced in the 1980s. and have since become a standard employee benefit for full-time employees.
“If it took us 30 years to implement 401(k)s across all of these businesses and industries. There’s no way it’s going to take a comparable amount of time to implement student loan repayment assistance It’s going to happen very quickly” and likely within the next three to five years, says Scott Thompson, CEO of Tuition.io, which currently manages this benefit for more than 150 customers, including Hulu, Children’s Hospital and Medical Center in Omaha, Nebraska. ; Staples; HP Inc. and The Estee Lauder Companies Inc.
Thompson adds that student loan repayment assistance is not an industry-specific benefit. “If you look at our customer base, you’ll see all kinds of businesses, from small to large, in just about any industry you can imagine,” including healthcare, technology and manufacturing, he said.
Among Gradifi’s clients, Oliva says those in the health sector are also emerging as quickly embracing this advantage as they try to attract nurses and doctors – people who are in deep debt. But, she adds, other types of employers, such as private K-12 schools, also offer this benefit to employees. “The student debt problem is so pervasive that you’re seeing interest from companies in all kinds of industries,” says Oliva.
Loan repayment assistance reduces the loan repayment period. Joining an employer’s student loan repayment assistance program can save the borrower thousands of dollars in student loan repayments.
Mike Fenlon, director of human resources at PwC, says his company’s student loan repayment benefit pays out $1,200 a year for up to six years. He says it can reduce participants’ loan principal and interest by up to $10,000 and shorten their repayment period by up to three years.
Some companies may structure their plans to reduce an employee’s student loan balance even further. According to Thompson, based on average student loan repayment plan contribution levels among Tuition.io customers, the benefit can reduce a participating borrower’s principal and interest obligations by approximately $15,000 to $18,000 – if the plan is not capped. He adds that some employers cap the amount they will contribute to student loan repayments at $5,000, $7,500 or $10,000. But, he says, about 60% of customers who use the Tuition.io platform offer uncapped plans.
Eligibility is also determined by an employer. Usually, an employee must work full-time, although there are a few companies, such as Aetna Inc., that offer this benefit to those who work part-time.
Companies may establish different eligibility rules or structure this benefit differently for recruitment and retention purposes.
“We offer this benefit to early career staff,” said Fenlon of PwC, where employees are eligible for the benefit at the partner and senior partner level; the benefit is not offered at the executive level.
Be aware that the benefits of repaying a student loan are taxable. Currently, dollars given to an employee under a student loan assistance program are considered taxable income. But there is momentum in Congress to change the tax law for this type of employer contribution. Last year, Republican Rep. Davis Rodney of Illinois introduced the Student Loan Assistance Employer Involvement Act, which would amend the IRS tax code to exclude student loan assistance. employer-provided education taxes and treat it essentially the same as 401(k) or employer contributions. tuition reimbursements.
“If passed, the bipartisan bill will have a massive impact on this benefit because employer contributions to student loans would become tax-deductible for employees, like 401(k)s. [retirement accounts]. But despite being a taxable benefit, at least for now, student loan repayment is hugely popular with employees, especially Millennials and Gen Zers,” says Jeff Oldham. , senior vice president of global and institutional markets at Benefitfocus, a cloud-based benefits enrollment company.
Are you trying to finance your studies? Get tips and more at US News’ Paying for College hub.