Douglas Olsen
Student loan debt is a significant issue, with 43 million borrowers owing over $1.74 trillion in student loans in 2024. To attract and retain employees, some companies have implemented programs to help pay off student loan debt. This setup can help employees avoid choosing between paying off their student loans and saving for retirement. Employers who offer student loan repayment assistance can do so tax-free up to a certain limit, and this benefit can be offered as a signing bonus or recurring payments. Employees should consider researching employers who offer such assistance and the various types of repayment assistance plans available.
| Characteristics | Values |
|---|---|
| Companies that help pay off student loans | Clayco, Connelly Partners, Nvidia, Abbott, Ally, Google, Hulu, First Republic, Fidelity, Estée Lauder, Aetna, Gradifi, and more |
| How it works | Companies contribute a certain amount towards employees' loans, make recurring payments directly to lenders, or provide signing bonuses that can be put toward student loans |
| Tax benefits | Up to $5,250 in student loan repayment benefits per employee per year is tax-free for employers until 2026 |
| Eligibility | May depend on factors such as tenure, work commitment, and employee category (full-time/part-time) |
| Benefits for employers | Student loan repayment assistance can help attract and retain talent, especially in a competitive job market |
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What You'll Learn
Companies that help pay off student loans
Several companies offer student loan repayment assistance as a benefit to their employees. According to a report by the Employee Benefit Research Institute, about 36% of employers offered student loan repayment assistance in 2024. These employers span a wide range of industries, including healthcare, technology, construction engineering, and financial services.
- Abbott: This healthcare technology company offers a benefit that helps pay off student loans and saves for retirement. Eligible Abbott employees who make a student loan payment of at least 2% of their salary will receive a 5% contribution to their 401(k) from the company.
- Ally: This financial services company offers a student loan repayment program, providing employees with $100 monthly toward student loan repayment, up to a $10,000 lifetime maximum. Additionally, they contribute $100 monthly to a 529 college savings plan, also with a $10,000 lifetime maximum.
- Clayco: This construction engineering company offers student loan repayment assistance to employees who make at least the minimum monthly payment. Clayco pays $100 per month towards an employee's student loans in the first year, increasing by $50 each subsequent year, up to a maximum of $250 per month in the fourth year. Employees can also direct their 401(k) contribution towards their student loan debt, and Clayco will continue to match that contribution.
- Fidelity: This financial services company offers a student loan repayment benefit with a lifetime maximum of $15,000 for employees working more than 20 hours per week, and $7,500 for those working between 20 and 30 hours per week.
Some other companies that are known to offer student loan repayment assistance include hospitals, as mentioned in a Reddit thread. Additionally, government agencies and private employers may provide up to $5,250 in student loan repayment annually as a tax-free benefit.
It is worth noting that these benefits may vary depending on the company and industry. Some companies may offer lump-sum payments, include assistance in paychecks, or tie the benefit to retirement savings. Employees can also suggest and negotiate these benefits with their employers, highlighting the advantages to the company, such as improved recruitment, engagement, and retention of employees.
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Tax-free benefits
The CARES Act of March 2020, enacted during the COVID-19 pandemic, allowed employers to provide up to $5,250 in annual student loan repayment assistance without tax consequences for the employer or the employee. This benefit was extended through 2025 by the Consolidated Appropriations Act.
The tax-free benefit of $5,250 is a combined limit for loan repayment and other types of education assistance under Section 127 of the Internal Revenue Code. This means that employees receive 100% of every benefit dollar, which is not considered income or payroll taxes.
For employers, student loan repayments are deductible as an ordinary business expense, reducing the company's taxable gross profit. This also does not include any savings on recruiting costs that companies might benefit from, as well as gains in employee productivity by alleviating a major source of financial stress.
The IRS has outlined certain rules and requirements for tax-free employer assistance in repaying student loans. These include having a written plan outlining terms and conditions, providing reasonable notice to eligible employees, and ensuring the program does not discriminate in favour of highly compensated employees.
Government assistance programs, such as the National Health Service Corps Loan Repayment Program, also offer student loan repayment benefits that are not subject to taxes.
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Student loan repayment assistance programs
Some companies offer lump-sum payments as a signing bonus when employees join, while others provide recurring monthly payments or contribute a certain amount toward employee loans. For example, Clayco, a construction engineering company, offers employees $100 per month toward their student loans for the first year, increasing by $50 each subsequent year up to a maximum of $250 per month in the fourth year. Similarly, financial services company Ally provides employees with $100 monthly toward student loan repayment, with a $10,000 lifetime maximum.
In some cases, employers may allow employees to direct their 401(k) contributions toward student loan debt, and the company will match that contribution. For instance, at Abbott, a healthcare technology company, employees who make a student loan payment of at least 2% of their salary will receive a 5% contribution to their 401(k). Fidelity, another financial services company, offers a similar program with a lifetime maximum of $15,000 for eligible employees.
It is worth noting that employer student loan repayment assistance is currently tax-free up to a $5,250 limit per employee per year. This benefit may change, as there are provisions to make it permanently tax-free and index the amount for inflation.
In addition to company-specific programs, there are also state and federal government-sponsored Loan Repayment Assistance Programs (LRAPs). These programs are often designed to encourage graduates to enter public interest and government work. For example, the Indian Health Service's Loan Repayment Program provides repayment assistance for a two-year commitment to practice in health facilities serving American Indian and Alaska Native communities.
Overall, student loan repayment assistance programs can provide valuable support to employees struggling with student loan debt, allowing them to focus on their careers and financial goals.
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Student loan repayment as a recruitment tool
Student loan repayment assistance has become an increasingly popular recruitment tool for companies. This is because it helps them attract and retain top talent, especially in industries that require higher education. In 2024, about 36% of employers offered student loan repayment assistance, and this number is expected to grow.
There are several ways in which companies can structure their student loan repayment programs. Some companies offer recurring payments directly to lenders, while others contribute to retirement savings plans or make lump-sum payments. For example, financial services company Ally offers a student loan repayment program that provides employees with $100 per month toward student loan repayment, up to a lifetime maximum of $10,000. On the other hand, Clayco, a construction engineering company, offers a choice between two plans: the first involves a monthly payment of $100 in the first year, increasing by $50 each subsequent year up to a maximum of $250 in the fourth year; the second plan allows employees to direct their 401(k) contribution toward their student loan debt, with Clayco continuing to match that contribution.
Some companies may require employees to work for a certain period before becoming eligible for student loan repayment assistance. Additionally, there is usually a maximum amount that companies are willing to contribute to an employee's student loan balance. It is important to note that student loan repayment assistance is currently tax-free for employers up to a limit of $5,250 per employee per year.
For job seekers with student loan debt, considering employers that offer student loan repayment assistance can be a strategic way to manage their finances. It is worth researching and comparing the different types of repayment assistance plans offered by companies to make an informed decision during the job search process.
Overall, student loan repayment assistance is a valuable recruitment tool that can help companies attract and retain talented employees while also improving employee satisfaction and productivity by reducing financial stress.
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Student loan repayment as a retention tool
Student loan repayment assistance is an increasingly popular strategy for companies to attract and retain employees. In 2024, about 36% of employers offered student loan repayment assistance, spanning a wide range of industries. This figure is expected to rise as employers seek to reduce financial stress and improve retention, satisfaction, and productivity among their employees.
Student loan repayment programs typically involve direct contributions from the employer to help pay down an employee's balance. Even small contributions can help reduce employees' loan principal and save on interest. Employers can also match an employee's payments up to a certain amount, encouraging employees to engage in debt repayment. Some companies offer payments tied to employee milestones, such as years of service or performance goals.
There are several ways in which companies can structure their student loan repayment programs. These include:
- Flat monthly contributions: Employers can commit to a fixed monthly payment (e.g. $100-$200) toward an employee's student loans, helping them chip away at their debt more quickly.
- Lump-sum payments: Some companies offer a one-time or annual contribution of up to $5,250 each year as a retention incentive.
- 401(k) student loan match programs: Employers can allow employees to direct funds toward loan repayment while still receiving an employer match to their retirement plan.
- Tiered or tenure-based benefits: Companies can offer increasing repayment assistance based on tenure, rewarding long-term employees.
Student loan repayment assistance can be a valuable tool for improving employee retention and reducing financial stress. It is a benefit that employees highly value, with some even willing to take a pay cut to have this perk. By offering student loan repayment assistance, companies can strengthen employee loyalty and build a committed and engaged workforce.
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Frequently asked questions
Many companies offer student loan repayment assistance, including Clayco, Connelly Partners, Google, Hulu, Nvidia, and First Republic. Some companies offer a lump sum payment, while others make recurring payments directly to the lender.
You will need to speak to your human resources department to see if your company offers student loan repayment assistance and to find out if you qualify. Some companies require employees to have been with the company for a set period before they are eligible, while others offer the benefit from an employee's first day.
You can suggest it to your human resources manager, highlighting the benefits to the company. For example, employers who offer student loan repayment assistance can do so tax-free up to a certain limit. Offering these benefits may also help recruit, engage and retain employees.
