Benefit Spotlight: Student Loan Payment Assistance

Wednesday, April 10, 2024 19:46 Posted by Admin

If your company is like other businesses, trying to find ways to stand out and gain an advantage in the competition for qualified employees, then reviewing your optional employee benefits is one potential avenue to success. Current research indicates that workers care about the benefits package, and you may be able to get some attention with the addition of some less standard perks. That doesn’t mean you should skimp on the usual health insurance and retirement, of course, but adding some unusual options may help if a candidate is considering more than one offer.

The number of Americans carrying student loan debt has skyrocketed over the last ten years, now exceeding 45 million consumers. In addition, the debt balance is higher than it has ever been, and many graduates (or parents who have taken out loans to help fund their children’s educations) fear they may never successfully repay these loans. The dire situation has been highlighted by the current two-year pause in payments, which started at the beginning of the Covid-19 pandemic and has now been extended through at least September 2022.

Borrowers have not been required to make payments on the $1.6 trillion they hold and have not been charged any interest. In addition, the seven million people previously in default on loans have been enjoying a reprieve from collection efforts. While greatly appreciated by most, this extended break has raised concern over the ability of borrowers to begin making payments again when the hiatus ends.

Employers have concerns about the effect on worker productivity.

Employees with heavy debt may postpone saving for retirement and may also be unable to buy homes, which reduces their mental commitment to the community in which they work and live. Perhaps more notable, high debt loads can cause workers to be stressed and preoccupied and possibly inclined to take on part-time jobs in addition to their regular work to enhance their income.

From the employer’s perspective, these circumstances may be troubling and worth addressing. Depending on the benefits you offer, you may have some existing ways to help or may be able to develop support with a new offering. Ask your Taylor Benefits Insurance associate about opportunities that fit your budget and workforce.

Linking loan payments to retirement accounts.

Some businesses are trying to assist employees that have been unable to manage the simultaneous repayment of their student loans with contributions to the company retirement plan. For example, Raytheon employees may be eligible for a company match of student loan payments that goes into their retirement account. While the benefit may seem tailored to younger workers, benefits consultant Willis Towers Watson points out that isn’t necessarily the case. For example, some workers have loan amounts that take decades to repay, while boomer parents accept new loans as they approach retirement themselves.

In other cases, employers offer a direct payment to the student loan balance, helping borrowers reduce their principal and thus shorten the repayment period. PricewaterhouseCoopers is an example of a leader in this practice, providing as much as $1,200 annually for eligible associates. Other companies have waiting periods and then provide a larger lump sum.

Employer assistance is temporarily nontaxable.

As part of the CARES Act (Coronavirus Aid, Relief, and Economic Security), employers can contribute up to $5,250 per employee toward student loan payments without tax consequences, at least through 2025. Still, only about eight percent of companies offer any assistance to their workers with student loans. That might change when the federal pause is lifted if no relief legislation accompanies the restart in payments. The well-respected Society for Human Resources Management predicts that more employers will see an advantage in recruiting by offering assistance to their workforce to differentiate their benefits packages from the crowd.