Talk about a sign of the times. Student loan repayment plans were one of the most buzzed-about benefit of 2018. It makes sense, given the staggering amount of student loan debt in the United States. According to the Federal Reserve, more than 44 million people in the U.S. owe $1.5 trillion in student loans.
And the number will only grow, according to projections from The Congressional Budget Office, which estimates $1.27 trillion in new federal student loans will be added over the next decade.
If this sounds like a benefit that would only appeal to Millennials, think again. While about 65 percent of the current student loan debt does indeed belong to people under age 40, that leaves a pretty significant chunk of almost-baby boomers who are approaching retirement still saddled with student loans.
Some pretty big companies offer student loan repayment plans, including Fidelity Investments, Live Nation, Aetna, PricewaterhouseCoopers and First Republic, offering between $100 a month to up to $2,400 a year for as long as necessary. In most cases, there are annual and lifetime caps in place that value the benefit at less than $10,000.
The benefit, usually administered through a third-party vendor, allows employers to make contributions to an employee’s student loan while employees continue to make regular payments. This principal-only approach can help the loan mature more quickly. Meanwhile, the fact that the benefit is not currently under ERISA means employers can pick and choose which employees receive the benefit, such as limiting it to recent graduates.
Surveys show this type of benefit can go a long way in recruiting and retaining employees and boosting their productivity. A 2017 survey from American Student Assistance found that a quarter of all young workers worry about repaying their student loans all the time, while another third worry about them often.
“Distracted employees are less productive, so this is a high-value way to alleviate some of their concerns,” says Lisa McMurtry, director of benefits for XMI.
Meanwhile, 86% of respondents said they would commit to their employer for five years if they helped pay off their student loans, and 92% said they would take advantage of a match for student loan repayments similar to a 401(k) match.
Despite the buzz, only about 4 percent of employers are offering this type of benefit, found the Society for Human Resources Management 2018 Employee Benefits Survey. A couple of reasons are the expense and the lack of a tax incentive for offering it. Another, says McMurtry, is simply that companies haven’t thought of it and budgeted for it.
XMI offers a student loan repayment program to its clients. For more information, give us a call at 615-248-9255 or email email@example.com.