<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=690758617926394&amp;ev=PageView&amp;noscript=1">
Skip to content

Consider the Benefits of Student Debt Repayment Plans

Consider the Benefits of Student Debt Repayment Plans

On August 24th, President Biden announced the long-awaited news that the federal government will forgive portions of student loan debt for people within a certain income bracket. 

The amount of loan forgiveness has been much debated over the last couple of years since President Biden made it part of his campaigning message. The final announcement confirmed that $10,000 of student loan debt would be forgiven for individuals who make $125,000 or less annually. 

While this forgiveness was welcome news, it doesn't exactly get those with student debt out of the woods. According to Lending Tree, 55% of students in the class of 2020 who earned a bachelor’s degree took on an average of $28,400 in federal and private debt. 

With repayment suspended until January 2023 as part of the COVID-19 relief legislation, employers are facing an interesting time as they review their benefits packages to attract the next generation of employees. 

What Is Student Loan Repayment Assistance?

Americans owe about $1.75 trillion in student loan debt. Some employers have decided to approach this startling statistic creatively by making student loan repayment plans part of their benefits packages. 

This kind of program allows employers to contribute to paying off an employee’s student loan balance. With this type of benefit, employers can directly impact an employee’s financial situation and address the challenges many of their employers face head-on. 

How Does it Work?

Traditionally, there are two ways these repayment programs can work. 

The first way sees a company offering to match an employee’s contribution to their debt up to a certain amount. For example, if an employee pays $200 a month toward their debt, the employer would also pay $200 for a total payment of $400 toward the loan. 

The most common way, however, is for employers to contribute a regular amount each month for a specific total at the end of the year. For example, an employer may offer to pay $100 towards the loan each month for a total benefit of $1,200 a year. 

As part of the Consolidated Appropriations Act that was signed into law in 2020 as part of pandemic relief efforts, employers can pay up to $5,250 tax-free toward an employee’s student loan debt. While only 8% of employers are currently taking advantage of this by offering repayment plans, that number is expected to rise after the moratorium on student debt repayment ends in January 2023.

How Repayment Plans Benefit All

The job market is an interesting place right now, with voluntary turnover high in most industries. That means employers need to get creative in their benefits options to attract and retain the best talent for their business. 

But the employee isn't the only one benefiting from such a plan. Benefits from a repayment plan are a two-way street. Some of these include:

1. Reduced Financial Stress on Employees

Being in debt causes a lot of stress. And we all know that the more stressed an employee is in their personal affairs, the less concentrated they are on their professional responsibilities. Repayment plans can help employees feel more in control of their financial situation and give them a great sense of financial and personal peace. 

2. Improved Motivation

It’s a rewarding feeling when someone feels like they are making progress toward a goal. As employees continue to see their amount owed get smaller with the assistance of their employer, the more motivated they will feel to continue the job they’re in with the company they feel is helping them achieve their goals.

3. Higher Retention Rates

In a survey by American Student Assistance, 86% of employees responded that they would stay with a company for five years or more if the company was helping them with their student loan debt. This type of retention helps employers in so many ways including saving a lot of money on the expensive recruitment and hiring costs as well as maintaining good workflow with employees who know their jobs well and are highly skilled for them. 

4. Attract Younger Talent

There was a time when a 401(k) plan was the key to attracting any generation to your company. However, younger employees today are more focused on the here and now instead of the distant future. That’s why helping employees with their immediate concerns will attract younger talent with all their skill sets to your ranks. With retirement so far off, younger employees are looking for different types of benefits before landing their perfect job. 

 

With student loan debt being a reality in so many employees’ minds, finding creative ways to not only assist them but earn their trust and loyalty is a mutually beneficial action. 

If you’re looking for more articles about everything HR and Payroll, Complete Payroll’s blog site is the place for you. Our extensive experience is available to help guide you through any questions you have with up-to-date information at your fingertips. Visit us today to see what we have to offer!

Get The Newsletter

Bi-weekly on Thursdays. We compile HR best practices, labor law updates & other content to help you pay and manage your workforce more effectively.

Ready For a Move to the Country?

Talk to Sales