There are plenty of reasons to consider offering student loan assistance to your employees. Here’s why it’s a good idea and how to start implementing it.
Here's what you need to know:
- A study shows that 75% of Americans think that employers should help pay for college
- Student loan repayment assistance can be a major draw for talent and help with retention
- Student loan repayment can also boost your DEI initiatives
- There are also potential downsides to offering student loan assistance
- College savings support is another popular employee benefit
In August, the Biden White House announced a historic move to forgive a portion of federal student loans. As the more than 43 million estimated student loan borrowers await relief, the move raises questions for business owners.
Employers offering assistance with student loan repayment isn’t anything new. The practice is something that employers in certain sectors have been doing for decades. What is new, especially since the pandemic, is the proliferation of student loan repayment assistance as a benefit.
When the CARES Act was signed into law in March 2020, it carved out a process for businesses to help their employees pay back their student loans. The CARES Act allows businesses to make up to $5,250 in student loan payments per worker every year.
The benefit is that businesses don’t have to pay payroll taxes on their contribution. On the employee side, workers don’t have to pay income taxes on the money either — a win-win!
Late that year, the Consolidated Appropriations Act was signed into law. This extended the ability of employers to offer this same amount of student loan repayment assistance for 5 more years. The Consolidated Appropriations Act means that you can take advantage of this benefit until January 2026.
Beyond the law, there are plenty of other reasons to consider offering student loan assistance to your employees. Here’s why it’s a good idea and how to start implementing it.
Student loan repayment assistance can be a major draw for talent
Only about 8% of employers currently offer student loan assistance as a benefit. Yet, the benefit is a popular 1 among job searchers and employees.
So, choosing to do so will make your business stand out among the crowd. This benefit will likely also really shine with younger generations who have just recently graduated and are beginning to pay off their loans.
Student loan repayment benefits can help with retention
Offering student loan benefits can help keep employees around in a few ways. First, there’s the option to tie repayment assistance with tenure at the company.
The other way that student loan assistance helps keep employees around is through employee satisfaction.
Perhaps the benefit doesn’t kick in until workers have been on the job for 6 months or a year. While it’s not always the best idea to withhold benefits, it is 1 way to go about offering repayment benefits.
The other way that student loan assistance helps keep employees around is through employee satisfaction. Not only does this benefit offer financial support, it’s a popular and coveted benefit that not many other places offer.
Your employees would be hard-pressed to find the benefit elsewhere. Plus, it shows that you value them. Happy and valued employees are less likely to leave.
Student loan repayment can boost your DEI initiatives
Black women hold more student debt than any other group. People of color tend to hold more student debt than White people overall. This means that offering student loan assistance can help with diversity, equity, and inclusion.
Chances are the benefit will be more attractive to the groups with the most student debt. But there’s more. Offering a benefit like student loan assistance can mean that marginalized groups are set to benefit most from it, helping tip the scales in the favor of equity.
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The downsides of offering student loan repayment assistance
The upsides of offering student debt benefits are clear, but what about the downsides? One of the biggest drawbacks is that it’s not a benefit that’s available to everyone. Only those with student debt can take advantage of assistance with repayment.
However, nothing is stopping you from rolling out a parallel benefit for those without student loans. But, especially if you’re looking at student loan assistance as an avenue towards equity, it’s going to have less of an impact. If those who aren’t burdened by student loans also get extra money, the equalizing factor goes out the window.
The other downside is having to roll out a new program, but that’s the same downside that any new initiative has. Things you’ll have to consider include whether or not you’ll help with just federal loans or if private loans will qualify, too.
Then you have to figure out how you’ll make the payments. You will also have to follow any regulations outlined in the laws if you want to reap the tax benefits.
Examples of companies that offer student loan repayment benefits
As CNBC reports, there are several (albeit high-profile) companies that offer student loan repayment benefits already. If you’re wondering how to structure the benefit at your business, consider learning from the companies who are already doing it:
- The Estée Lauder Company. In 2018 the company announced that they would offer $100 in student debt contributions each month up to a lifetime total of $10,000 for all full-time U.S. employees. This applies to those at director levels and below who have also been at the company for a year or more.
- As of 2020, Google has been matching up to $2,500 each year in student loan payments for full-time, U.S.-based employees. A Google spokesperson told CNBC that there is no cap on how student loan assistance is given to employees during their time at the company.
- Fidelity Investments. Fidelity started offering student loan assistance back in 2016. The perk is available to any employee working at least 20 hours a week. Employees are eligible beginning on their first day on the job. Here’s how it works: Employees working between 20 and 29 hours a week can get up to $89 a month to put toward their loans, capping at $7,500. Those working 30 hours a week can get roughly $179 a month — up to $15,000 total.
- Live Nation Entertainment. All full-time employees at Live Nation are eligible for the benefit once they’ve worked at the company for 6 months. Qualifying employees can get $100 every month to put towards their loans for up to 60 months total, which means $6,000 total.
Student loan assistance isn’t the only way to help with education costs
Maybe this isn’t the right time for you to match a chunk of your employees’ debt. There are other ways that you can help with the cost of education.
When employees welcome a new baby into their family, you can gift them a 529 college savings plan and match a portion of contributions. This might be a good thing to offer in parallel to student loan forgiveness if you have employees without debt.
Chances are, it will be a popular move. A whopping 75% of Americans think that employers should help pay for college. Student loan and college savings support are 2 of the most desired employee benefits. After all, it’s American businesses that reap the benefits of American education.
The key to all of this is figuring out what works for you, your business, and your employees. Take stock of who your employees are and what they want from benefits. Then, figure out what you can do to at least start moving in that direction.
It’s never easy to make a major pivot or commitment like this. But, as with all things business, you have to weigh the pros and cons. If the upsides outweigh the drawbacks, then it’s time for you to take action.