Is a Student Loan Repayment Benefit Right for You?
In 2019, a company has to have strong differentiators in order to attract talent in a strong employment market. While health insurance and matching 401(k)s have become standard benefits, some organizations are recognizing the value of helping recent graduates out today by offering to help pay back their student loans.
Student loans are a $1.5 trillion burden faced by 44 million Americans, with the average borrower owing around $37,000.
In this difficult recruiting environment, adding a low-cost benefit for employees’ peace of mind seemed like a win-win, says Micky Swortzel, owner of New Eagle. With millennials becoming a larger part of the workforce every day, assistance in paying back student loans is an attractive benefit that hits workers’ pockets immediately rather than at retirement age, the way a 401(k) does.
The student loan benefit is still relatively new, and there are many implications to consider when rolling out this benefit as an employer, as well as receiving the benefit as an employee. Either way, the ability to help alleviate the stress of paying off student loans is an attractive perk.
Companies That Offer a Student Loan Repayment Benefit
While the willingness of employers to contribute to student loan payments isn’t too popular just yet, it is gaining legs.
PwC, a global accounting and consulting firm, was the first large company to roll out a student loan repayment benefit. Beginning in July 2016, it offered to pay employees up to $1,200 a year for six years total. So far, 8,400 people and counting have registered, and feedback from the company has been positive, even for those without student loans, according to Matt Bylis, a senior external communications associate at PwC.
Smaller organizations are getting in on the trend, as well.
Personal finance site Student Loan Hero (SLH) is sticking by its mission to help borrowers pay down their pesky school debt.
“I took advantage of SLH’s student debt repayment assistance, which offers up to $2,000 a year to help with student loans,” says Frankie Rendón, a media outreach specialist at Student Loan Hero.
Other companies like Fidelity, Live Nation, and Staples have implemented varying amounts of the benefit, ranging from $1,000 to $2,000 per year.
How Companies Implement Their Programs
Companies usually cap the student loan repayment benefit over the span of an employee’s time there. For example, PwC caps out at $7,200, which would be six years of employment.
The implications of these benefits vary. Some companies offer the amount outright, while others, like Abbott, offer a similar approach to the 401(k) matching policy. Impressively, Abbott has made it more attractive by offering a five percent match for just two percent contributed to 401(k) payments.
This benefit really hits home for those staring at their debt, wondering how they’ll overcome it.
Potential Drawbacks of a Student Loan Repayment Benefit
While having more money to put toward paying down debt sounds good, it could come at a cost for the borrower in the long run. Skeptics are wary that employees will be clouded by the allure of student loan help rather than focusing on taking a job with a higher salary and income potential.
More money today means being able to pay down debt faster and start investing sooner in a young professional’s career. Taking a salary of $5,000 more per year at a company not offering student loan help would more than account for the average $1,656 a year in student loan assistance from employers that do offer the benefit, according to a paper published in the Journal of Financial Planning.
When it comes to employers, the federal government is not regulating the benefit very highly just yet. Matthew Burr, a human resources consultant, recommends that employers activate the benefit sooner rather than later. However, he would also strongly advise looking into the tax implications before doing so.
Since the benefit is so new, the human resources departments, now commonly known as “people operations” at high-tech companies, may not necessarily know the best ways to administer it, as they would when it comes to paid time off (PTO) or health-related benefits.
Technology platforms like Vault have emerged to help companies navigate this new variable in their benefits package.
“Student loan repayment benefits are a complicated and cumbersome benefit to administer internally because of the sensitive employee information involved,” says Vault CEO Matt Beecher. “A technology partner can help companies easily offer a benefit like this by removing the administrative hurdles and allowing employees to manage their benefits as they see fit.”
Pay Off Your Student Loans, Regardless
Having a cushion to rely on isn’t a bad option if a student loan repayment benefit appeals to you. “Knowing I would receive this benefit made me excited about being able to work on my master’s degree and not worry about student loans,” says Ashley Patrick, the founder of Budgets Made Easy.
Whether or not an employer helps you pay off student loans, the key is to take action. If the principal isn’t paid down, the interest will only continue to mount, and the finish line will be further out of site than it already seems.