Student Loan Payment Assistance Is The Hottest New Job Benefit

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Millions of debt-ridden higher graduates desire help paying off their student loans. This year, they may just get it from their employers.

While a growing number of companies take started offering pupil loan repayment every bit an employee benefit in recent years, the combination of a new tax break, stiff competition for workers and heightened attention on the nation’south growing student debt could drive a large boost in the do good this yr.

About a 3rd of companies say they’re considering introducing educatee loan repayment assistance in 2022 or 2023, with 3% already planning a roll out this year, according to a report from the insurance firm Willis Towers Watson. Plus, companies with existing programs are improving the benefit through larger contributions and wider parameters for eligibility, experts say.

That sort of growth could have what has been a relatively niche do good — it’southward currently offered at less than one in ten companies — and bring it into the mainstream.

Employer pupil loan contributions are getting bigger

The value of a student loan repayment benefit varies past industry, merely in general, companies are being more generous with their monthly contributions.

Gregory Poulin is co-founder and CEO of Goodly, a student loan benefits provider and fintech company based in San Francisco. Amidst Goodly’s clients, the boilerplate employer contribution toward student loans has increased by around 50% since the pandemic hit, he says. Before the pandemic, companies typically contributed an average of near $83 a calendar month toward each employee’due south pupil loans. That figure is closer to $150 today and the largest payments can become every bit high every bit $400, Poulin says.

In some cases, companies with existing programs are simply setting bated more money for the benefit. Fidelity Investments, which launched its program in 2016, recently increased the maximum lifetime limit per employee from $x,000 to $15,000.

And Chegg, the student-focused learning platform that was another early adopter of student loan benefits, started boosting payments based on tenure. All full-fourth dimension employees with student debt take received up to $1,000 in student loan payments each twelvemonth since the program started. In 2019, the company added a new program for entry-level employees through vice president-level workers who have been with Chegg for at to the lowest degree ii years. Those employees are eligible for upward to $5,000 annually, on meridian of the $one,000 cash payments. To pay for the program, Chegg sold stocks that were set aside for executive team compensation.

Other companies started brand new programs. McLaren Health Intendance, a hospital network operating in Michigan, launched a new educatee loan aid program at its Flintstone location this month. Payments start at $200 per participant, per month. McLaren then increases the amount to $300 in the second year of participation and to $450 in the third yr.

The program is aimed at employees in high-demand positions including registered nurses, respiratory therapists, pharmacists and medical technologists. McLaren Flint will pay a maximum of $xv,000 toward an eligible employee’southward student loans.

Most repayment assistance programs are designed so that employees take to continue making their minimum monthly payments so the employer contribution acts as an additional payment. That helps employees pay off their debt quicker while saving money on interest.

Permit’south say y’all owe $thirty,000 in pupil loan debt at a iv.vi% interest rate and the term of your loan is 10 years. You’d be paying $312 a month.

With a $150 monthly contribution on top of your monthly minimum, y’all’d pay off your loans in about half dozen years instead of 10. Bump up the employer contribution to $400 a month, and you’d be debt-complimentary in under 4 years.

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More employees are getting admission to educatee loan aid

Information technology’s not merely contributions that are increasing at some companies. Eligibility parameters are getting bigger, also.

When Memorial Hermann Health Organisation, based in Texas, introduced a student loan repayment benefit in 2016, the goal was to attract top talent and address a shortage in nurses, says John Eshleman, manager of benefits at the hospital system. The program was a quick success — Memorial Hermann found kickoff-year retention with registered nurses went up 12% in the first two years of the plan.

The company currently reimburses up to $400 a calendar month toward loans attached to clinical degrees or up to $200 toward loans tied to not-clinical degrees. The lifetime cap is $20,000 per employee.

Memorial Hermann started out by offering the benefit only to employees who had graduated in the last 3 years. In 2020, it was expanded to apply to employees who take graduated in the past five years.

“Nosotros’ve helped our employees reduce pupil loan debt by over $5 million,” Eshleman says.

In improver to increasing its lifetime max, Allegiance also widened eligibility for its do good last yer. The company ended a waiting period that required employees to spend at least six months with the company before getting the perk. Now workers can enroll on the first day of employment.

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Student loan assistance is now a meliorate deal for employees

One big reason pupil loan repayment assist is primed to continue growing, experts say, is because it makes more sense for the companies’ lesser lines now.

Before Congress passed the CARES Human action in 2020, employer contributions toward an employee’s pupil loans were considered part of the employee’s income, pregnant employees had to pay income tax on whatever corporeality of student loan repayment aid they received. Not anymore.

An employer tin now pay up to $five,250 per year toward an employee’s educatee loans on a tax-free basis through 2025. Plus, the employer now gets a payroll revenue enhancement exclusion on the contribution amount.

Prior to the implementation of this new tax break, an employer’s annual contribution of $5,250 would have cost both the visitor and the employee about $400 in payroll taxes, according to the national law firm Bradley. Moreover, an employee with a 22% federal income tax charge per unit would owe $1,155 in federal income taxes. Then in the finish, the employee ends up with a internet benefit of just about $three,695. And the employer would have paid $5,650 for it. Now, every dollar a company spends on a qualified pupil loan repayment programme goes toward its intended purpose — paying down debt.

“That got a lot of employers’ attention,” says Scott Thompson, CEO at Tuition.io, an education aid benefits platform. “Over the last few years, equally nosotros’ve talked with more than and more employers, one of the impediments has ever been, ‘why is this a taxable benefit?'”

Subsequently the tax rules changed, Google launched its own student loan repayment program. As of this month, the tech giant matches up to $2,500 in student loan payments per employee, per yr.

Favorable taxation rules stay in place through December 2025, though Congress can vote to extend rules or make them permanent, which some experts remember is probable.

Every bit Poulin, with Goodly, points out, 401(yard) legislation was a temporary provision at get-go, likewise.

“Then it was extended and ultimately made permanent,” he says. “That’due south what we anticipate volition happen with student loan repayment every bit well.”

If yous’re in the job market place, use this tool to find companies that will help you pay off your educatee loans faster.

This story has been updated to clarify how Chegg sold stocks to fund its debt repayment programme.

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Source: https://money.com/student-loan-repayment-assistance-bigger-employee-benefits/