I will graduate with loan debt that will take a long time to repay. Is it true that some companies pay off your student loans?
With around 70% of students graduating with tens-of-thousands of dollars in debt, your question has everyone’s attention. Yes, it’s true that some companies have been contributing to the repayment of employee’s student debt. The company’s goal is to attract and retain new employees. That means helping you pay your debt annually, as long as you stay with the company. Here are the details.
The current average student debt after college is over $35,000, and there are over 40 million loans, resulting in a total national burden of $1.3 trillion. Offering to ease this burden is a powerful recruiting and retention tool for employers. However, last year only 4% of members of the Society for Human Resource Management said that their companies offered loan repayment benefits.
Businesses that are more likely to offer loan repayment aid are usually offering hard-to-fill positions in finance, IT or nursing. The incentive for graduates with highly valued skills is a big one, though it can be a high-cost gamble for the employer, explains a high-tech CNC machines manufacturer.
This relatively new benefit for Millennials could grow in the future, considering the increasing rates of student debt. Many would prefer debt assistance over a pay raise as it helps to incentivize them to pay the loan off quicker.
Most employees with student loans would take advantage of this benefit which would in turn increase morale, productivity and general well-being, while putting the company ahead on talent recruitment and employee retention. A research study was made of managers who were questioned about employees with student debts. It creates stress for employees which decreases productivity, concluded managers overseeing electrical work. Their employees would also prefer that repayments come out of their payroll directly.
It all sounds great but one major drawback is that student loan repayments count as income and subject to tax. Any reimbursements are considered closer to bonuses than benefits in the eyes of the IRS. Any and all loan reimbursements from employers will need to be claimed on tax returns regardless of company payout policies. Unlike tax-deductible tuition reimbursement, which provides employees up to $5,250 annually, student-loan reimbursement is not a fixed sum and is taxable.
Actual benefits and contributions to loan repayments vary from company to company. Fidelity Investments, for example, offers a $2,000 reimbursement package spread over five years if you have spent more than six months at the company. PricewaterhouseCoopers provide a $10,000 package over six years. Graphics-card giant Nvidia offers up to $6,000 per year for those that have graduated in the last 3 years.
These programs are all designed to retain employees, build loyalty, attract sought after skills, and boost productivity. A mutually beneficial agreement between employer and employee.
We all think we’re going to get out of debt – Louie Anderson.
(Jacob Maslow is the founder and editor of Legal Scoops).
