Recently, more companies have started adding student loan assistance to their employee benefits package. And it’s for good reason, considering seventy percent of college students graduate with an average of $37,172 in student loan debt. Since a big part of their paychecks go toward student loans, it’s no surprise that student loan repayment is a compelling benefit — if not the most compelling benefit — for employees, particularly millennials.
Despite the allure of student loan assistance for employees, many employers are holding off since they can’t claim a deduction. However, this could change soon. In February, lawmakers proposed legislation that would make student loan assistance tax-exempt for employers.
Here’s what you need to know about the legislation, and the benefits of offering it (for you and your employees).
What are the details?
The legislation, known as The Employer Participation in Repayment Act of 2019, would allow you to give tax-free student loan assistance of up to $5,250 a year per employee. Based on the tax code, that’s the same amount that you can provide to employees for tax-free tuition assistance.
As of now, payments for student loans are considered taxable income for recipients, and as their employer, you can’t claim a deduction for these payments. If the new legislation passes, it will remove an obstacle for employers interested in providing assistance.
Why is it important?
Currently, only four percent of organizations offer taxable student loan repayment assistance, according to a 2018 SHRM Employee Benefits survey. In comparison, roughly half of organizations offer tax-exempt undergraduate or graduate education assistance. But approximately one in four American adults are paying off student loans, and nearly 20 percent owe more than $100,000 in student loan debt. With those numbers, it's safe to say that student loan assistance is a much-needed (and long overdue) benefit that could bring relief to your employees who are struggling to pay off their loans.
What’s in it for employers?
Considering the pervasiveness of student loan debt, it’s understandable that student loan repayment is a highly sought-after benefit. By offering it, you can attract and retain talent, especially recent graduates. Not only that, but if you can help workers pay off their student debt, they’ll be more inclined to pursue higher education, which can prepare them for higher-level roles within your company.
Should you consider student loan assistance?
In this job market, a competitive benefits package can make all the difference in attracting and retaining top talent. When hashing out your benefits strategy, look at what other companies are offering and how you can stand out from the pack. Considering the benefits of this new legislation, it might be time to think about if a student loan assistance program makes sense for you, your employees and the people you want to attract. If not, that’s okay, but figure out what it will take. For more ideas, check out our employee retention toolkit. It’s packed with great tips that’ll help you hold on to (and attract) winning talent!