Douglas Olsen
Student loan debt is a significant issue, with 59% of college graduates from the class of 2023 taking on debt and the average balance being $29,374. Luckily, there are companies that offer student loan repayment assistance. In 2024, about 36% of employers offered this benefit, and they span a wide range of industries. This assistance can take the form of recurring payments to lenders or contributions towards retirement savings. For example, financial services company Ally offers a student loan repayment program where employees can receive $100 monthly toward repayment, with a $10,000 lifetime maximum. So, if you're looking for help with your student loans, exploring job opportunities with these companies may be a good option.
| Characteristics | Values |
|---|---|
| Employers offering student loan repayment assistance | 36% in 2024 |
| Employers offering student loan repayment assistance by industry | Various |
| Maximum tax-free benefits from employers | $5,250 through 2025 |
| Student loan repayment assistance by employers | Recurring payments to lenders or contributions towards retirement savings |
| Student loan debt average for class of 2023 | $29,374 |
| Percentage of college graduates from the class of 2023 with student debt | 59% |
| Student loan repayment program by financial services company | $100 monthly with a $10,000 lifetime maximum |
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What You'll Learn
Employers offering student loan repayment assistance
Student loan repayment assistance is an increasingly popular perk that can help employers attract and retain talent. It is also a highly desired benefit for employees carrying student debt. Employers can offer student loan repayment assistance in several ways, including:
Signing Bonuses
Some employers offer a lump-sum payment as a signing bonus when employees first start.
Recurring Payments
Employers can make direct payments to the lender on the employee's behalf. These payments can be monthly, annually, or at some other interval. Employers may also include the assistance in the employee's paycheck, which they can then use to pay down their loans. On average, businesses that offer student loan assistance pay around $50 to $100 per employee per month, with some companies offering up to $170 per month.
Matching Contributions
Employers can set up a student loan repayment program where they match the employee's contributions at a comfortable percentage.
Trading Vacation Time
At least one company allows employees to apply unused paid time off toward their student loans instead of carrying it over to the following year.
- Ally Financial: Employees can receive $100 monthly toward student loan repayment, with a $10,000 lifetime maximum.
- Chegg: Employees with student debt can receive a $1,000 annual cash grant.
- Clayco: Employees can receive $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.
- Fidelity: Employees can receive assistance with a lifetime maximum of $15,000.
- New York Life: Employees can receive up to $170 per month toward their student loans, with a lifetime maximum of $10,200 after five years of contributions.
- SoFi: Full-time employees get a monthly contribution toward their student loan repayments of up to $5,250 per year.
If your current employer does not offer student loan repayment benefits, you may consider suggesting it to your human resources manager by highlighting the benefits to the company. Alternatively, you can look for a new job with a company that offers this benefit.
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Tax-free benefits for employees
Employees can benefit from tax-free benefits to help pay off their student loans. This is made possible through educational assistance programs offered by employers. These programs have been traditionally used to pay for books, equipment, supplies, fees, tuition, and other educational expenses. However, since March 27, 2020, they can also be used to pay the principal and interest on an employee's qualified education loans. Payments can be made directly to the lender or to the employee.
The tax-free benefits under these educational assistance programs are limited to $5,250 per employee per year. This benefit is available until December 31, 2025, thanks to the Consolidated Appropriations Act, which extended the tax break. This $5,250 limit is a combined limit that includes employer-provided tuition assistance programs. Employers who do not have such programs may consider setting one up to attract and retain qualified workers.
There are also certain government assistance programs that offer student loan repayment benefits without requiring employees to pay taxes. For example, the National Health Service Corps Loan Repayment Program offers up to $75,000 in payments over two years.
If you are already employed, it is worth checking with your HR department to see if such a program exists and how to sign up for it. If you are job searching, it may be beneficial to look for employers who offer student loan repayment assistance.
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Retirement savings contributions
While it is possible to use retirement savings to pay off student loans, it is generally not advisable to do so. Retirement savings plans, such as IRAs and 401(k)s, are designed to provide financial security during retirement, and withdrawing funds early can result in penalties and taxes. However, there are a few scenarios where using retirement savings to pay off student loans may be considered.
Firstly, if you have a Roth IRA, you can use your contributions to pay off your student loans without incurring penalties or paying income tax, even before you reach retirement age. This is because contributions to Roth IRAs are always distributed before earnings. However, if your student loan balance is greater than your Roth IRA contributions, withdrawing earnings may result in penalties and taxes if you are under the age of 59½.
Secondly, if you are 59½ or older, you can withdraw funds from a traditional IRA to pay off your student loans at any time without penalty. If you are younger than 59½, withdrawing funds from a traditional IRA to pay off student loans will likely result in income tax and early withdrawal tax penalties.
It is important to note that student loans do not qualify as an exempt purpose for early withdrawals from retirement accounts. Qualified expenses for penalty-free withdrawals from IRAs include tuition, books, room and board, fees, equipment, and supplies, but student loan repayments are not included in this category.
Instead of using retirement savings to pay off student loans, it may be more beneficial to explore other options, such as making regular on-time payments to establish a good credit history and taking advantage of tax deductions for student loan interest payments. Additionally, if you have access to a qualified workplace retirement plan, such as a 401(k) or 403(b), consider contributing enough to receive your employer's match, as this can provide "free money" towards your retirement savings.
In conclusion, while it is technically possible to use retirement savings contributions to pay off student loans, it is generally not recommended due to potential penalties and taxes, as well as the opportunity cost of losing out on compound interest and retirement savings. It may be more advantageous to explore other options for repaying student loans while simultaneously contributing to retirement savings plans.
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Financial wellness benefits
Research has shown that student financial wellness programs can lower student loan defaults, decrease financial stress, and improve academic performance and graduation rates. These programs can teach students how to budget, save, and manage their finances to achieve realistic goals. For example, the University of Louisville's Office of Student Financial Aid provides tips and resources to help students budget wisely, control debt, and establish healthy financial habits.
Additionally, financial wellness benefits can help employees start saving for their children's education and plan for their financial future, including retirement. By offering these benefits, companies can empower their employees to achieve financial wellness and reduce the negative impact of financial stress on their lives.
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Student loan repayment programs
Federal agencies are authorized to implement student loan repayment programs as a recruitment or retention incentive for highly qualified personnel. Agencies must report annually to the U.S. Office of Personnel Management (OPM) on their use of student loan repayment authority.
To establish a student loan repayment program, agencies should first determine whether they will repay all eligible loans. They should also address eligibility issues, such as whether the program will be open to employees on appointments that can lead to permanent positions. Additionally, agencies should require applicants to submit a signed service agreement and include consent to disclose financial information. Updated account statements should be part of the initial application and annual renewals to ensure proper distribution to qualifying loans.
When designing the program, agencies should consider multiple communication channels, such as intranet and Internet websites, a Listserv, and a dedicated email inbox for program-related exchanges. Assuring timely customer service is also essential, with prompt response times to inquiries. An online application system can streamline the process and populate a database on student loan repayment benefits.
The payment options within the program may require negotiations with the lender to adjust the existing payment schedule to conform to the dollar limits established under the Student Loan Repayment Program. One approach is to set a minimum period of service, convert the loan amount to years, and determine the loan payment period based on the period of service.
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Frequently asked questions
Some companies offer student loan repayment assistance as an employee benefit. This includes financial services company Ally, which offers a monthly stipend of $100 toward student loan repayment, and a health care technology company (name undisclosed) that contributes 5% to an employee's 401(k) when they pay at least 2% of their salary toward their student loans.
According to a report by the Employee Benefit Research Institute, about 36% of employers offered student loan repayment assistance in 2024. Employers from a wide range of industries offer this benefit.
Student loan repayment assistance can take the form of recurring payments directly to lenders or contributions toward retirement savings. Employers can offer employees tax-free benefits of up to $5,250 through 2025 thanks to the Consolidated Appropriations Act.
You can inquire about financial wellness benefits during your job search or application process. Some companies may not advertise student loan repayment assistance but could still offer financial benefits that can help with loan repayment.
