Student loans can feel like a financial nightmare, but what if your employer threw you a life line? I've been taking advantage of my companies Employer Student Loan Repayment Program and it's truly accelerated my debt payoff journey.
Employer Student Loan Repayment has emerged as a game-changer for both organizations and employees.
This article will help you understand what employer student loan repayment is, how it works, and the companies that are stepping up to help ease the burden of student loan debt.
What is Employer Student Loan Repayment?
Employer Student Loan Repayment is a benefit offered by some forward-thinking companies to assist their employees in paying off their student loans. It's goal is to attract and retain top talent by addressing one of the most pressing financial concerns for many professionals today.
With employer student loan repayment, businesses contribute a certain amount towards their employees' student loan debt. These contributions are typically made monthly and can significantly accelerate the debt payoff process for employees.
A study by the Society for Human Resource Management (SHRM) found that as of 2021, 8% of U.S. employers offered student loan repayment assistance, with this number expected to grow.
I continue to add companies to our directory as the benefit grows in popularity but if you don't see your company listed go ahead and add your company for free!
Employer Student Loan Repayment and The CARES Act
Prior to the COVID-19 pandemic, student loan repayment assistance of any amount was considered taxable income and subject to payroll taxes.
In March 2020 during the COVID-19 pandemic, the CARES Act was passed. This brought relief to federal student loan borrowers through measures like the payment pause, also known as administrative forbearance, and interest rates were set to 0%
It also allowed employers to provide up to $5,250 in annual student loan repayment assistance without any tax consequences for both the employer and the employee. This is still in effect and is extended through 2025.
Is Employer Student Loan Repayment Tax-Free?
Yes, employers can provide up to $5,250 in annual student loan repayment assistance without any tax consequences. The $5,250 limit is the combined limit for all educational assistance, this includes both expenses related to student loan debt payments and tuition reimbursement.
Being a tax free benefit through 2025, this benefits both the employer and the employee as the employer gets a payroll tax deduction and the employee gets to avoid paying income tax on the student loan payments.
How Does Employer Student Loan Repayment Work?
Employers typically set up these programs with specific terms, including the maximum contribution and eligibility criteria. For example, at some companies the benefit might be available right after the employee's date of hire or it won't become available until the employee has worked there for one year or more.
Contributions might range from $50 to several hundred dollars monthly, with caps that usually extend up to $10,000 or more over an employee's tenure at the company.
Employer Student Loan Repayment Examples
With NVIDIA's Student Loan Repayment Program, if you graduated within the past three years, you can apply for reimbursement of up to $350 a month to help repay your student loans, up to a lifetime maximum of $30,000!
Employers can also set up these programs to pay out on an annual basis in one lump sum, like Chegg's Equity For Education Benefit which pays $1,000 annually to an employees' student loan debt.
Why Offer Employer Student Loan Repayment Assistance?
Repaying student loans is a major concern for college students and recent graduates. As reported by the Education Data Initiative, the average federal student loan debt is $37,338 in the U.S.
To address this issue, many employers are introducing repayment benefits to attract younger workers such as Millennials and Gen Zers, who are more likely to carry student debt.
By offering student loan assistance, employers can not only attract younger talent but also retain their existing workforce, leading to cost savings in employee acquisition. In fact, 86% of employees would commit to a company for 5 years if the employer helped pay back their student loan debt.
These younger generations have different priorities when it comes to employee benefits, with their significant student loan burden potentially impacting their engagement with benefits like a 401(k).
Thankfully, the SECURE Act 2.0 allows employers to match workers' student loan payments with tax advantaged retirement contributions, effective since January 1, 2024.
This means that if an employee is paying $300 to their student loans, an employer can match that payment and contribute $300 to the employees 401(k). Employees no longer have to feel like they have to choose between retirement and paying down their student debt.
The Benefits for Employees and Employers
For Employees
- Accelerated Debt Payoff: The most direct benefit for employees is faster loan repayment, reducing the total interest paid over time. To see what an extra $100 monthly contribution could do for your payoff journey, use our student loan repayment calculator.
- Financial Relief: This assistance allows employees to allocate funds towards other financial goals like building up savings for a house, wedding or retirement.
- Increased Job Satisfaction: Knowing that an employer is invested in their financial well-being can enhance job satisfaction and loyalty.
For Employers
- Attracting Talent: In a competitive job market, these programs can be a significant draw for job seekers.
- Employee Retention: Employees are likely to stay longer with a company that helps them with their loans.
- Tax Benefits: The Consolidated Appropriations Act of 2021 allows employers to make tax-free contributions of up to $5,250 per employee annually towards student loans until 2025.
Different Types of Employer Student Loan Assistance
Not all Employer Student Loan Repayment programs are created equal. Some companies offer direct payments to your loan servicer, while others provide reimbursements based on your monthly payments. Take a look at some different types of employer student loan assistance:
- Monthly Payments: Companies like New York Life Insurance, American Family Insurance and Estée Lauder provide monthly contributions to their employees' student loan debt.
- Annual Payments: Chegg provides a yearly contribution in the form of $1,000 per year. During an employee's second year, Chegg will pay an additional $5,000 per year. For those at the Director of Vice-President level, the additional payment is up to $3,000 annually.
- Sign-on Bonus: Some employers, like ATI Physical Therapy, even provide a sign-on bonus which can be put towards an employee's student loan debt. If you're interviewing for a company and they offer a sign on bonus, consider using this to pay down your student loan balance.
- Contract-Based Assistance: Companies like VSP Vision provide up to $50,000 per year for four years! To be selected, program participants must commit to working in a private practice or other optometric modality (including retail, corporate, medical or onsite clinics) that serves a community with limited access to vision care.
- Retirement Contributions: Companies like Abbott as well as Travelers Insurance have student loan repayment programs that are tied to 401(k) contributions. This means employees making payments on their student loans, will get a certain % match put into their 401(k) account so they are not missing out on saving for retirement.
- Lifestyle Reimbursement: KeyBank provides a lifestyle reimbursement plan which can be used for things like fitness, wellness but also student loans! Employees can get up to $500 per year and put it towards their student loan debt.
Companies That Provide Student Loan Repayment
Here are some companies that provide student loan repayment. You can view even more, search by industry, and see who's hiring with student loan repayment benefits on our directory.
- Adidas: Employees who work at least 30 hours a week qualify for a $100 per month – or $1,200 per year – stipend through Adidas' new Student Loan Support Program.
- Advent Health: Full-time team members can request up to $200 per month, up to a total of $12,000.
- Ally Financial: The company provides $100 per month towards student loans, with a lifetime cap of $10,000.
- Emory Healthcare: Employees can receive a $100 monthly loan payment (up to $1,200 a year). The benefit has a $10,000 lifetime cap per employee.
- Hulu: $1200 per year per employee.
- PwC: Participating associates or senior associates will get up to $1,200 per year.
- Sharp Notions, LLC: Provides $100 per month ($1,200) annually) towards Student Loan Repayment Assistance.
- SoFi: Pays $200 per month towards employees' student loan debt.
- The U.S. Government: Agencies may make payments to the loan holder of up to a maximum of $10,000 for an employee in a calendar year and a total of not more than $60,000 for any one employee.
- Weedmaps: Pays $1,000 per employee per year toward either a student loan or 529 savings plan, which will be paid in monthly installments of $83.33 per employee per month.
Success Stories and Market Trends
Several companies have successfully implemented these programs and have shared their success.
New York Life Insurance implemented their student loan repayment benefit in 2017 and below are the results:
- $12,147,060 contributed by New York Life since 2017.
- $1,385,530 New York Life has contributed in 2023.
- More than 200 employees with paid-off loans.*
- $36,306 average student loan debt of employees enrolled.
*Employees may choose not to report when their loan repayment is finished; actual count may be higher.
American Eagle Outfitters has facilitated more than $100,000 in contributions to associates' student loan debt. Below is the impact:
- $2.8M+ of total impact.
- Shaving 766 years off associates' repayment time.
These initiatives have not only enhanced employee satisfaction but also improved the companies' overall brand as socially responsible employers.
As we head into 2024, I bet more and more companies will be providing student loan repayment benefits to attract employees - and I'm happy to help promote it!
How to Implement Student Loan Repayment Benefits for Your Employees
Here are key steps to creating a successful student loan repayment program:
Set Your Budget
Determine your monthly or annual allowance for student loan repayments. While the IRS allows tax-free assistance up to $5,250 per employee annually, you have flexibility in choosing the amount.
Consider starting with a modest monthly payment, like $100 or $200, with the option to increase over time. Tailor payments for different employee groups, encouraging retention and minimizing turnover costs.
Example: McLaren Health Care offers $200 monthly in the first year, increasing in the second year, and again in the third year.
Define Eligibility Criteria
Decide who qualifies for the benefit. Choices range from offering it to all employees, only full-timers, or based on tenure or position.
Use job-related criteria to avoid discrimination and ensure fairness.
Follow IRS Guidelines
To maintain a tax-free repayment program, adhere to IRS guidelines. Ensure the benefit doesn't favor highly compensated employees, doesn't exceed 5% annual benefits for certain stakeholders, doesn't offer cash in lieu of the benefit, and provides reasonable notice to eligible employees.
A written benefits plan is also essential so make sure you're working closely with your HR and Legal departments.
Partner with Student Loan Repayment Companies
There has been a rise in companies that provide a service to help employers set up and manage their student loan repayment programs.
Here is a list of companies that can help you with getting started:
- Tuition.io
- Peanut Butter
- Summer
- Highway Benefits
- Candidly
- BenefitEd
- Gradifi (Morgan Stanley)
These companies can assist your HR teams with administrative tasks while also providing tremendous value to your employees.
While implementing a student loan repayment program, you may also want to consider other services that these companies provide like setting up student loan management tools and educational resources for your staff.
The Future of Employer Student Loan Repayment Assistance
The increasing prevalence of these programs reflects a growing recognition of the student debt crisis and its impact on the workforce.
As more companies recognize the mutual benefits of offering loan repayment assistance, we can expect these programs to become a staple in employee benefits packages.
Final Thoughts On Employer Student Loan Repayment
Employer student loan repayment programs represent a collaborative effort in addressing the student debt crisis. They not only provide financial relief to employees but also offer companies a way to attract and retain top talent.
As these programs become more common, they could play a crucial role in reshaping the landscape of student loans and financial wellness in the workplace.
