How Employers Can Handle Employee Student Loan Debt

in Business by Ryan Gutzeit

How Employers Can Handle Employee Student Loan Debt

How Employers Can Handle Employee Student Loan Debt

Part of being a good employer is looking out for the financial well-being of your employees. As the student loan debt of your employees increases, stress and anxiety may start creeping into the workplace, affecting their performance and attitude. This article will discuss three ways that employers can ease the stress of their employees' debt and create a more fulfilling work environment.

Offer a Repayment Program

One way to both bring in and keep employees is to acknowledge the debt they had to accept to gain the skills necessary to aid you and your company. Offering a repayment program is a great way to ease the burden of debt off of your employees and help decrease their stress, which may, in turn, increase productivity and workplace positivity. Paycor Inc. explains that through the year 2025, employers can offer up to $5,250 in student loan repayments without having to pay taxes on it due to the Consolidated Appropriations Act, which was signed into law in the later months of 2020 as part of the COVID-19 pandemic relief efforts.Fidelity Investments states that a study conducted in 2017 showed that 86 percent of workers between the ages of 22 and 33 would commit to a company for five years if that company offered student loan relief.2  It may be beneficial for your company to create its own repayment plan instead of joining an already-established program management platform set up by an outside financial organization. A few things to keep in mind when setting up a repayment program are:

  • The monthly payments you are willing to contribute. Even if you only provide $50-$100 monthly, this can help your employees save significant amounts of money in interest fees.
  • The maximum amount you are willing to contribute.
  • Who will be eligible? Non-discrimination rules that apply to other benefit programs do not apply to student loan repayment programs.
  • If the repayment benefits exceed $5,250 a year, they are considered wages and are subject to federal income and payroll tax withholding. 1

As of 2018, the IRS-approved Abbott Laboratories designed a method to aid their employees in their student loan debt repayment plans. The company makes a matching contribution of 5% of the employee's compensation if the employee contributes to their 401(k) and/or student loans of at least 2% of their compensation.

Invest in a Financial Planning Program for the Company

Another way to help gather and keep employees struggling with student loan debt is to invest in a company-wide financial planning program. Financial planning can be bundled in with other employee benefits like health insurance and retirement savings and can include consultations with financial advisors and education/assistance with budgeting in both the short and long term. The financial needs of your employees will vary from person to person, so adding financial planning into the benefits bundle may help ease the busy mind of workers and create a bond between company and employee that nurtures loyalty and security. Ensuring that your employees of all levels are financially stable and supported may also help reduce the risk of white-collar crimes that could devastate your business. Financial planning softwares such as MoneyGuidePro and RightCapital are good for companies. However,  hiring a private financial advisor onto the team could help tailor the advice to the needs of the individual employees.3

The Last Note

One more note on hiring employees with student loan debt: hiring people of a certain age group is unlikely to reduce your problems with employees having student loan debt. Requiring a certain amount of years in experience or looking for more mature candidates will likely leave your company with the same anxiety-ridden employees, as a 2018 study showed that 45% of student loan debt throughout the United States belongs to people over the age of 40.3 The best way to ensure your company does not fall under the crushing weight of student loan is to hire competent employees that will fit in with the energy of your workplace and do your job as an employer to take care of them through repayment programs and financial planning.

Works Cited

1 “Employer Student Loan Repayment Program: 5 Tips for 2022.” Paycor, https://www.paycor.com/resource-center/articles/employer-student-loan-repayment-program-5-tips/.

2 “Fidelity Launches New Program for Employers to Help Workers Pay off Student Debt.” Fidelity Launches New Program for Employers to Help Workers Pay Off Student Debt | Fidelity Investments, https://newsroom.fidelity.com/press-releases/news-details/2017/Fidelity-Launches-New-Program-for-Employers-to-Help-Workers-Pay-Off-Student-Debt/default.aspx.

3 Arlene S. Hirsch, M.A. “Employers Explore Repaying Student Loan Debt.” SHRM, SHRM, 16 Aug. 2019, https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/employers-explore-repaying-student-loan-debt.aspx.

About the Author

Ryan Gutzeit

Ryan Gutzeit is the founder and president of TSLHG  He and his team have spent the last decade helping borrowers better understand their student loan repayment and federal forgiveness options. By educating borrowers, Ryan and the rest of the TSLHG team have saved thousands of borrowers from overpaying on their loans and helped them get debt-free faster.

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