Douglas Olsen
Student loan repayment assistance programs are becoming increasingly popular as employers seek to attract and retain top talent. Employers can offer up to $5,250 in student loan repayment benefits tax-free through 2025. This benefit can be offered in various ways, such as signing bonuses, recurring payments, or matching contributions. Some well-known companies that offer student loan repayment assistance include Aetna, Google, Carvana, and Ally Financial Inc. With the growing demand for help with student loan debt, employers can differentiate themselves by offering this valuable benefit to their employees.
| Characteristics | Values |
|---|---|
| Number of employers offering student loan repayment assistance in 2021 | 17% of employers with 500 or more employees |
| Amount contributed by employers | Up to $5,250 per employee each year (tax-free) |
| Companies offering student loan repayment | Aetna, Google, Ally Financial Inc., Carvana, CommonBond, Chegg |
| Amount contributed by companies | $100-$200 per month, $1,000 per year, $2,000 per year, $3,600 total |
| Other benefits | Signing bonuses, paid time off (PTO) exchange, retirement savings, direct payments to lenders |
| Benefits for employers | Attract and retain talent, improve productivity, differentiate from competitors |
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What You'll Learn
Student loan repayment assistance programs
Under federal law, employers who have educational assistance programs can use them to help pay student loan obligations for their employees. Traditionally, educational assistance programs have been used to pay for books, equipment, supplies, fees, tuition, and other education expenses for the employee. However, now 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, and by law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year.
Some examples of companies that offer student loan repayment assistance include:
- Aetna, a leading health insurance company, offers to match student loan payments up to $2,000 per year for employees working at least 20 hours per week, with a lifetime maximum of $10,000.
- Carvana, a car-buying site, offers full-time employees up to $1,000 per year to pay down their student loan debt in partnership with Gradifi, an employee benefits company specializing in student loan repayment.
- CommonBond, a financial services company, offers eligible workers up to $100 per month with no lifetime maximum until they pay off their debt.
- Chegg, a learning platform, previously offered a $1,000 cash benefit to employees to repay their loans but expanded its program in 2019.
- Google also offers student loan repayment benefits.
Additionally, there are federal loan repayment programs, such as the Indian Health Service's Loan Repayment Program, which provides repayment assistance for a two-year commitment to practice in health facilities serving American Indian and Alaska Native communities. The Public Service Loan Forgiveness (PSLF) program is another example of a federal program that can help with loan forgiveness.
Overall, student loan repayment assistance programs can provide invaluable support to employees struggling with student loan debt, and more employers are expected to adopt these programs in the future.
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Tax-free benefits
The burden of student loan debt can be a major stressor for graduates, affecting their mental health and productivity. A growing number of employers are offering student loan repayment benefits to attract and retain talent.
Employers can provide valuable assistance to employees with their student loan repayments, and this assistance is tax-free. The IRS does not consider employer-provided assistance to be taxable income for the employee. However, there is a limit to the tax-free amount: under an educational assistance program, the maximum annual exclusion for educational assistance per employee is $5,250. This limit also applies to student loan repayment benefits. Any amount exceeding $5,250 will be considered wages and will be subject to federal income and payroll tax withholding.
Employers can contribute to their employees' student loan repayments in various ways. Some employers may choose to match their employees' student loan payments, up to a certain amount per year, while others may offer a fixed amount of assistance per year. Additionally, some employers may provide assistance only to full-time employees, while others may extend the benefit to part-time employees as well, albeit at a reduced rate.
It is important to note that the tax-free benefit for student loan repayment assistance is currently in effect until December 31, 2025. After this date, it is unclear if the benefit will continue to be tax-free.
Some examples of companies that offer student loan repayment benefits include:
- Aetna: a leading health insurance company that offers education reimbursement and student loan matching contributions. For employees working at least 20 hours per week, Aetna will match student loan payments up to $2,000 per year, with a lifetime maximum of $10,000.
- Carvana: a car-buying site that offers full-time employees up to $1,000 per year towards their student loan debt.
- CommonBond: a financial services company that provides private student loans and refinancing, offering its employees up to $100 per month towards their student loan debt until it is paid off.
- Chegg: a learning platform that previously offered a $1,000 cash benefit but expanded its program in 2019 to offer more assistance.
- Ally Financial Inc: a digital financial services company offering bank accounts, investing options, and loans.
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Signing bonuses
If you receive a signing bonus, one of the best ways to use it is to pay down your student debt. With this extra money available to you early in your career, you can use it to take a big chunk out of your student loans. It is important to note that signing bonuses are often tied to certain requirements, such as a specified period of employment or the completion of a specific certification or project. If these requirements are not met, employees may be required to pay back all or a portion of the bonus.
Additionally, it is worth considering the interest rates on your student loans when deciding how to allocate your signing bonus. By targeting the loan with the highest interest rate, you can maximize your savings and reduce the overall cost of your debt.
It is also important to be mindful of any tax implications associated with signing bonuses. In the United States, for example, signing bonuses are typically subject to federal income and payroll tax withholding. However, under the Consolidated Appropriations Act, employers can contribute up to $5,250 per employee each year toward qualifying education expenses without increasing the employee's gross taxable income.
Overall, signing bonuses can be a valuable tool for paying off student loans, but it is important to carefully consider your specific financial situation and the terms and conditions associated with the bonus.
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Direct payments to lenders
The amount contributed by employers towards student loan repayment can vary. Some employers may match employee loan payments up to a certain amount, such as $100 per month, with a maximum lifetime benefit. Others may contribute a fixed amount, such as $50 or $100 per month, which can still save employees thousands of dollars in interest over time. According to the Employee Benefit Research Institute, 17% of employers with 500 or more employees offered student loan repayment assistance in 2021, and this number is expected to grow.
It is important to note that until December 31, 2025, employers can provide up to $5,250 in annual student loan repayment assistance without tax consequences for the employer or employee, thanks to the CARES Act of March 2020 and subsequent extensions. This limit is a combined total that includes employer-provided tuition assistance programs. After this period, any amount exceeding $5,250 will be considered wages and will be subject to federal income and payroll tax withholding.
Some employers may also tie student loan repayment to retirement savings. For example, an employer may offer to contribute to an employee's retirement fund if they allocate a certain percentage of their paycheck towards student loan payments. This approach can help employees address both their short-term loan obligations and their long-term retirement goals.
Direct repayment programs can be a valuable tool for employers to attract and retain top talent, improve employee productivity, and differentiate themselves from competitors. With student loan debt affecting a growing number of graduates, these programs are becoming increasingly popular and sought-after.
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Student loan reimbursement
Signing bonuses are lump-sum payments made to new employees to help them pay off their student loans. Recurring payments can be made directly to the lender on a monthly, annual, or other agreed-upon basis. Some employers may also offer to match employee contributions up to a certain amount per year, with a lifetime maximum. For example, Aetna matches student loan payments up to $2,000 per year, with a lifetime maximum of $10,000.
Additionally, student loan reimbursement can be a powerful tool for attracting top talent. With the rise in student loan debt, employers can set themselves apart from competitors by offering this sought-after benefit. In 2021, 17% of employers with 500 or more employees offered student loan repayment assistance, and this number is expected to grow.
It's worth noting that there are tax implications associated with student loan reimbursement. Under the CARES Act of March 2020 and the Consolidated Appropriations Act, employers can provide up to $5,250 in annual student loan repayment assistance without tax consequences for the employer or employee through 2025. Any amount exceeding this limit is considered wages and is subject to federal income and payroll tax withholding.
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Frequently asked questions
Companies of all types are starting to offer student loan repayment assistance, including large tech companies like Google, financial services companies like Ally Financial Inc., and even car-buying sites like Carvana. According to a report from the International Foundation of Employee Benefit Plans (IFEBP), only 4% of companies offered student loan repayment benefits in 2019, but that number is expected to grow as employers compete for the best workers.
The amount that employers contribute to student loan repayment varies. Under the 2021 Consolidated Appropriations Act, employers can contribute up to $5,250 per employee each year towards qualifying education expenses without increasing the employee's gross taxable income. Some employers may offer a lump sum as a signing bonus, while others make recurring payments or match employee payments up to a certain amount.
Student loan repayment assistance is becoming an increasingly common benefit that employers offer to attract and retain talent. If you are interested in finding out if a company offers student loan repayment assistance, you can research employers who offer this benefit or ask about it during salary negotiations.
