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Consider the Benefits of Student Debt Repayment Plans

A federal suspension on student loan payments is ending

A piggy bank next to a jar of money and a graduation cap.

LAS VEGAS — As an employee benefit, "student loan repayments can help employees with their financial issues and create goodwill for your company," Karen Gustin, executive vice president for Ameritas Group Dental and Eye Care in Lincoln, Neb., said during a concurrent session at the SHRM Annual Conference & Expo 2021.

The average U.S. household with student debt owes $57,520, according to NerdWallet's 2020 household debt study, she noted.

On Sept. 30, the federal government's student loan repayment suspension ends, barring any last-minute extension. "That's a big date for many of your employees," Gustin said. [Update: the Biden administration extended the moratorium on student loan repayments until Dec. 31, 2022.]

"Your youngest employees aren't impressed with traditional financial benefits," as it's a long way to retirement for them, she noted. They are, however, looking for immediate financial support.

Only 8 percent of employers made contributions to employees' student loans last year, according to the 2020 Society for Human Resource Management (SHRM) Employee Benefits survey.

Benefit Options

Gustin described the following forms of loan repayment benefits:

  • Employee-assisted student loan repayment plans. An employer makes a regular contribution to employee student loans, sending contributions directly to the loan servicer. The contribution amount is at the employer's discretion and most commonly is $100 per month.
  • Matching contributions. An employer makes a matching contribution equal to a percentage of the employee's own contribution, similar to a 401(k) match.
  • A choice between retirement plan or student loan contribution. Employees are allowed to choose between receiving from their employers a 401(k) plan contribution match or a student loan contribution match. "The advantage to employers is that this doesn't create a new budget item," as it is cost-neutral, Gustin said.

Among vendors, look for systems with easy administration and a user-friendly platform for HR and employees, she advised.

Other related benefits employers may offer, Gustin noted, are:

  • Student loan counseling.
  • Student loan refinancing support.

A Tiered Approach

To focus on retention, some companies are using tiered student loan repayment programs that reward employees for their tenure, Gustin said, such as by offering:

  • $50 a month for one year of service with the company.
  • $100 a month for two years of service
  • $150 a month for at least three years of service.

As SHRM's survey showed, "few employers are offering loan repayment benefits," she said. "Get in now and you can differentiate yourself from competitors. It's a difference maker."

A Tax-Excluded Benefit, for Now

Legislation signed into law a the close of 2020 extended for five years COVID-19 relief that allows employer-provided student loan repayment as a tax-free benefit to employees under Section 127 of the Internal Revenue Code. Through 2025, employers can continue to make contributions of up to $5,250 per employee annually toward student loan assistance without raising the employee's gross taxable income.

SHRM supports permanently expanding the tax exclusion for employer-provided education assistance to include student loan repayment. "SHRM has long championed policies that allow employers to offer education assistance programs relevant to the modern workforce," said James Redstone, director of public policy at SHRM. "Greater certainty regarding the tax treatment of education assistance is an important step in expanding the availability of such benefits."


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