Student Loan Repayment Assistance: Benefits for both Employers and Employees
Student loan debt represents a $1.7 trillion burden on more than 40 million Americans today. Many employers are taking the initiative and tackling this problem head-on through student loan repayment assistance for their employees. This post will look at student loan repayment assistance, how these programs work, and the benefits for both employers and employees.
What is Student Loan Repayment Assistance?
Student loan repayment assistance is a benefits solution that allows employers to make contributions to paying off an employee’s student loan balances. This benefit enables companies to directly impact their workers’ financial situations and address the challenges associated with debt. This ability creates a compelling employee benefit that improves employee satisfaction and retention.
How It Works
There are generally two ways that these repayment programs work. The first is where a company offers to match an employee’s payment up to a certain dollar amount. For example, if an employee chooses to pay $150 per month, the employer would add $150 to their amount to make a total payment of $300 towards the loan.
The second and most common approach is for employers to pay a regular monthly amount towards the balance. For example, an employer may opt to pay $100 a month for a total of $1,200 a year.
Benefits of Employer Student Loan Repayment for Employees
Regardless of a company’s particular approach to these payments, these programs deliver several real-world benefits to employees. Many of these positive effects interconnect with other benefits, which means that an employer’s student loan repayment program often goes much farther in meeting real needs than other benefits. In many cases, it’s a win-win-win for everyone. Here are just a few of the top benefits:
- Reduced Financial Stress
Many employees report that this debt is holding them back from their short- and long-term financial objectives. Employee assistance programs can take the edge off of this stress and move an employee closer to financial peace.
- Progress Towards Financial Wellness
In addition, student loan repayment assistance helps employees realize even more progress toward paying off their debt. In many cases, these programs can accelerate the debt payoff speed. This accelerated payment helps employees reach their goal of long-term financial wellness much sooner than they could alone.
- Improved Motivation
Making progress on paying off debt is rewarding. As employees watch their balance drop, progress inspires further progress. This motivation solidifies the commitment to paying off student loans or even becoming completely debt-free, which has a cascading positive effect on an employee’s physical, emotional, and financial situation.
Benefits of Employer Student Loan Repayment for Employers
It’s not just the employee who benefits from an employer’s repayment program. Employers also benefit, making these programs a win-win for employees and employers alike. Here are some of the top benefits for employers:
- Making a Difference in the Lives of Employees
There is something inherently rewarding about helping others. Assitance programs like this allow businesses to do just this and touch real people’s lives in meaningful ways that truly make a difference.
- Increased Employee Retention
A recent survey by American Student Assistance (ASA®) found that 86% of employees would commit to staying at a company for five years if the company helped them pay off their student loan debt. This makes employer repayment programs a must-have for employers looking to improve employee retention. They can foster a long-term commitment from employees and dramatically reduce turnover within this category.
- Employer Tax Benefits
Repayment assistance also has a positive financial benefit for employers. The CARES Act, extending through 2025, allows employers to make annual tax-free contributions of up to $5,250 to an employee’s student loans. This gives employers great financial flexibility and latitude to offer either payment matches or regular monthly payments.
The Bottom Line
Student loan repayment programs deliver real-world value to employers and employees alike. As you explore your 2022 benefits packages, consider one of these programs for your employees.