Part Two

Of Two

Last week we looked at a few of the top benefits employers receive by offering their employees a student loan repayment benefit including attracting better talent, retaining your best employees, and improving employee morale and productivity. If all the reasons we discussed previously aren’t reason enough to be providing your employees with this benefit, in this post we will look at a few additional benefits employers receive by offering their employees assistance in conquering the massive mountain of student loan debt they are facing.

It Is Flexible And Can Be Customized To Your Business Needs

One of the best things about offering a student loan repayment benefit is the flexibility such a benefit affords the employer. The employer is able to choose its own set of rules for who will qualify to receive the benefit and how the benefit program will be administered. Most employers require their employees to work full-time, although a few also offer the benefit to part-time employees. Typically, a student loan repayment benefit works by the employer paying a set amount towards the principal balance of an employee’s student loans while the employee continues to make their payments the same way they usually would. The employer usually sends these payments directly to the student loan servicer, rather than paying it to the employee, to ensure the benefit is used the way it is intended. The average amount being paid by employers for a student loan retirement benefit is $100 per month per employee enrolled in the benefit, but the employer is able to choose any amount which makes sense to their bottom line and their employees’ needs. However, if an employer is not quite ready to contribute towards the payments of their employees’ student loans, there are also many counseling services they can offer for the employees that will still help their employees understand and ensure they are maximizing their payments for their student loans by assisting them with things such as refinancing their loan at a lower interest rate.

Help Your Employees Take Advantage of Your Other Benefit Offerings

One of the biggest reasons employers began to recognize their employees’ need for a benefit that helped them face their student loan debt was the recognition that new employees were not taking advantage of as many existing benefit options being provided, especially employer 401-(k) match programs. When taking a deeper look at this issue and talking to their employees, employers began to find out their employees wanted to take advantage of these other employer benefit offerings, they simply could not feasibly fit it into their budget because of the massive amount of student loan debt they were facing. This is a common issue across every industry as a recent study conducted by Boston College’s Center for Retirement Research found that college graduates who have student loan debt save 50% less in their 401-(k) by the age of 30 than college graduates who do not have any student loan debt. For most graduates, taking out these student loans was necessary to obtaining the degree they needed to get this job, and they shouldn’t be forced to choose between paying off that debt and saving for their retirement as both are extremely important to their overall financial stability. Another benefit enrollment that is being affected by the student loan debt problem are health benefits – as many employees are choosing between being able to afford to make their student loan payment or to be able to cover their portion of the employer’s health insurance benefit premium. Unfortunately, many employees are having to choose not to enroll in their employer’s health insurance benefit (or any health insurance coverage for that matter), even further putting their financial future at risk by betting it on their health. A student loan repayment benefit can help employees better manage the huge burden of their student loan payments and put more money back into their budget that they can then allocate towards taking advantage of their employer’s other benefit offerings.

Help Your Employees Conquer Their Financial Challenges

The student loan debt crisis is a true crisis to the American economy. In fact, recent statistics show that there are more than 44 million people with student loan debt who owe more than $1.5 trillion combined. This makes student loan debt one of the largest consumer debt categories, second only to home mortgages. About 70% of all college graduates have student loan debt and there is not much being done to relieve students of this burden in the future – the average graduating student from 2016 owes $37,000 in student loans, which increased to nearly $40,000 in 2017, and continues to increase each year with estimates indicating another $1.27 trillion in new student loan debt is expected to be added by the year 2028. Additionally, approximately 20% of people with student loan debt owe more than $100,000. All of this means just one thing – every employers bottom line is ultimately likely to be affected by this overwhelming student loan debt issue as consumers have less funds available to spend.

In a recent survey, 54% of college graduates stated they did not believe they would ever be able to make enough income to pay off their student loan debt and reach their financial goals for the future. Employers who offer a student loan repayment benefit to their employees are able to help their employees conquer their greatest financial challenges and fears by helping them pay off their loans sooner, at a lower rate overall, and to save for their future. It is estimated that the average employee receiving student loan repayment benefits can pay their loans off approximately three years sooner than anticipated and save between $15,000 and $18,000 on their overall student loan debt – this figure is a combination of the employer’s contribution to paying down the debt and the combined effect of paying less interest overall as a result of paying the loan off sooner.

Pending Legislation Could Provide Tax Incentives For Employers In The Future

In February 2017, a bi-partisan bill with more than 100 co-sponsors was introduced in the United States House, The Employer Participation In Student Loan Assistance Act H.R. 795, which if passed would allow employers to treat student loan repayment benefits in a manner closer to the tax incentives currently being provided to employers for offering benefits such as tuition reimbursement, which allows employers to contribute up to $5,250 a year towards an employee’s current tuition costs at a tax free rate. It is important to note that because the bill has not yet passed, student loan repayment benefits are still treated as income and thus require the employer and the employee to each pay their part of the income tax on it. While many companies are currently holding out on offering student loan repayment benefits right now because there is currently no tax incentive to do so, when this bill passes the number of employers offering this benefit will likely expand so quickly that it will become one of the most popular and standard benefits available. Doesn’t your company want to be one of the ones who can claim they paved the way to this monumental benefit?

If your company is interested in considering your options for adding a student loan repayment benefit to your employee benefits package, contact the specialists at the Student Loan Advisory Group to discuss the many options we have available to assist you. Contact us today to schedule your complimentary corporate seminar!