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Student Loan Repayment Programs
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Student Loan Repayment Programs: “Ask About It At Work”

Recognizing a pressing need to offer more robust benefits to compete in today’s uber-competitive war for talent, growing numbers of employers are considering innovative ways to help employees pay off their college debt.

Help to repay student loans is a benefit many people, especially recent college graduates, say they desire even more than paid time off. It’s no wonder. More than 44 million people collectively hold nearly $1.5 trillion in student debt, 65% of which belongs to people under 40, according to the Society for Human Resource Management.

There are a number of great companies that already offer these benefits. If your employer doesn’t offer student loan repayment assistance (yet), don’t fret. Experts expect student loan repayment benefits to become more common in the workplace within the next five years.

Here’s why you should pay attention to this valuable benefit, some tips on what to do if your employer doesn’t yet offer student loan repayment assistance, and how to spark a conversation about it at your office.

Who Is Offering Student Loan Repayment Programs?

Around 4% of US employers, most larger companies, report they are helping employees repay their student loans with cash payments of about $250 a month, according to the Society for Human Resources Management (SHRM).

Companies like Fidelity, Aetna, Penguin Random House, Nvidia, and Staples all offer student loan repayment programs (SLRPs) that include either annual or monthly lump sum payments or matching contributions on employees’ student debt payments. Even the federal government offers an SLRP benefit.  

Dubbed the “hottest employee benefit of 2018” by Forbes, SLRPs are typically administered by third-party vendors, which allows employers to make monthly payments directly to an employee’s student loan servicer while employees also continue to pay down the debt. These monthly contributions can help workers pay off their loans several years sooner, often saving them hundreds of dollars in interest payments.

Trading Vacation Days for Student Loan Repayment Benefits

SLRPs are an attractive benefit, but some employers are thinking of more creative trade-offs if they don’t have the budget for an SLRP. In fact, 60% of Americans age 18-34 said they would give up an existing benefit in exchange for student loan forgiveness; 1 out of 5 would trade paid time off for help from their employer to pay off their college debt.

Starting next year, one employer is giving its workforce the ability to make that trade. Chattanooga, Tennessee-based Unum Insurance will begin offering employees the opportunity to cash in up to five of their paid vacation days in exchange for student debt repayment help. For each vacation day, Unum employees will receive the equivalent of their daily rate for an eight-hour day. Even parents who share responsibility for a child’s loans qualify to take advantage of the benefit as well.

Balancing Retirement with Student Loan Repayment Programs

In August 2018, pharmaceutical giant Abbott Laboratories also took an innovative approach to help its employees get their financial houses in order. The company obtained approval from the IRS to implement a benefit for student loan borrowers inside its 401(k) plan.

As long as Abbott employees can prove they are contributing at least 2% of their pay toward their student loan debt, the company will make a contribution equal to 5% of their salary to their 401(k), even if they don’t actively contribute to the retirement plan. The benefit is unique in that it enables Abbott employees to pay off student debt while also helping them save for retirement.

One big upside to combining student loan repayment assistance within a retirement plan is it eliminates tax liabilities for both the employer and employee, according to Amy Ouelette, Director of Retirement Plan Services at Betterment for Business. “As employers think about benefits, they want to offer the greatest option that works for employees to get to the financial state they want in the most tax-efficient way,” she adds.

Why Don’t More Companies Offer Student Loan Repayment Programs?

If helping employees better manage their finances is a priority, then why don’t more employers offer similar “hybrid” student loan repayment/401(k) savings benefits?

Abbott received approval to amend its 401(k) plan via a “private letter ruling” from the IRS — a one-off solution specific to the company. Other employers who want to follow in Abbott’s footsteps would have to obtain their own private letter ruling, an expensive and time-consuming process that’s out of reach for many mid-sized and smaller companies.

“Writ large, I don’t know that the IRS ruling itself changes much – but it has definitely accelerated the prospects for a more holistic solution,” notes Nevin Adams, Chief Content Officer at the American Retirement Association. “We realize that, ultimately, individuals are being asked to fund competing short- and longer-term priorities from the same pocket(s).  Employers want their workers to be able to take full advantage of these important benefit programs — and this arguably one-off solution in the form of a private letter ruling to a significant impediment is just another example of how creative employers are willing to be to help their workers do so.”

Will the Government Have a Say in Student Loan Repayment Programs?

A government program with a broader application would likely make it easier for employers to offer student loan repayment programs for their employees. While the IRS private letter ruling certainly clears the way for more companies to offer similar student loan repayment/401k savings benefits, it is not the final word by any means.

Lawmakers aren’t oblivious to the fact that student debt has reached “crisis” levels. In fact, there are proposals before Congress to give workers the flexibility to save for retirement while also having access to money to pay back their student loans.

One such proposal, introduced in December 2018 by Senate Finance Committee Ranking Member Ron Wyden, D-Ore, allows employers to make matching contributions to a 401(k) retirement plan while their employees make student loan repayments. Other options currently on the table are expanding student loan forgiveness programs, and a revision to existing tax laws that would allow workers to choose whether their employer 401(k) match would go toward their retirement savings or paying down their student loans.

Asking About Student Loan Benefits at Work

If your company doesn’t offer a student loan repayment program, it doesn’t hurt to ask if they’re thinking about it for the future. “Employees should ask the questions [about whether their employer plans to offer SLRPs], because it brings about more awareness of the benefit, “Ouelette says. “But don’t be surprised if the answer isn’t ‘yes’ today. Employers need to hear employees are interested for SLRPs to be offered more widely, but it won’t happen overnight.” Still, it makes sense to include student loan repayment assistance in your compensation negotiations, whether you’re seeking a new job or looking for additional perks at your current one.

In the meantime, it pays to consider more traditional ways of tackling your student loan debt, such as refinancing, which can potentially lower your interest rate and help you pay off your loans faster. You could also make extra payments—more than the monthly minimum—to help shrink your principal balance. Even a few extra dollars a month can add up, making a significant difference in how quickly you get those loans paid off.

Finally, don’t let your student loans ruin your life. Yes, you should consider the impact that major life decisions like getting married, buying a home, or having kids could have on your finances, but also think about creative ways to deal with debt as a result of those decisions, rather than letting it dictate whether or not you put them on hold indefinitely.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.