For many companies, offering student loan repayment assistance is a smart way to show employees how much they value their education and training. In fact, a recent study showed that 45% of employees would rather have this type of benefit over a 401(k).
There are four federal student loan repayment options: Standard Repayment, Income-Based Repayment (IBR), Graduated Repayment, and Extended Repayment. All have different benefits and costs, so make sure you choose the right one for your goals.
Eligibility
Student loan repayment assistance is a benefit offered by some employers to help employees pay off their student loans. It’s tax-free up to $5,250 and can be a valuable benefit for your company’s bottom line.
There are several ways to qualify for this type of student loan repayment assistance. One way is to work for an employer that offers it, or you can apply through the federal government based on your occupation. Health professionals, public defenders, military members and STEM workers are among the occupations that may be eligible for this type of benefit.
Some states also offer loan repayment assistance programs for a variety of jobs, including teachers, nurses, doctors and lawyers. You’ll want to check with your state’s higher education department for information on these options.
If you’re a teacher, your state might offer the Teacher Loan Repayment Program, which pays up to $17,500 toward your student loan debt for up to four years if you teach full time in a high-needs school or educational service agency. The program also requires you to meet certain qualifications and be employed for at least five complete academic years.
Alternatively, you could apply for Public Service Loan Forgiveness (PSLF), which forgives the balance of your federal loans after making on-time payments under an income-driven repayment plan for 20 or 25 years. The application process for PSLF involves submitting the Employment Certification for Public Service Loan Forgiveness form each year or as you change jobs.
For those who qualify, this is a relatively easy process. Just fill out a PSLF form on the Federal Student Aid website and submit it along with other required paperwork to your loan servicer.
Once you’ve applied and received approval, your lender will send you a promissory note with an offer to repay the loan. You’ll then need to sign that note and return it to the lender. Then your loan will be disbursed within a few days, typically via direct deposit.
The next step is to start making your payments on time each month. This is an important step to take if you’re trying to get your student loan debt under control and qualify for student loan forgiveness. Then, once your debt has been reduced to 10% or 15% of your discretionary income, you can consolidate it into a Direct consolidation loan and get your monthly payments down even further while extending the term of your loans.
Benefits
Student loan repayment assistance is a type of employee benefit that provides employers with the ability to make contributions to employees’ student loans. These payments can help borrowers lower their monthly payments and save on interest charges.
These programs also help employers compete for top talent. They can help improve the quality of the workforce and reduce turnover costs, as they demonstrate employers’ commitment to helping their employees get ahead financially.
This is a great benefit for many employers, especially when it comes to recruiting and retaining younger employees who have high levels of debt. In fact, 26% of Gen Z and 27% of Millennials surveyed in our 2022 Employee Benefits Survey Report considered student loan repayment assistance very or extremely important.
Employers who offer these benefits are able to make a positive impact on their employees’ financial lives, which has been shown to enhance workplace productivity and engagement. Additionally, student loan paydown benefits can help employers diversify their talent pipeline by encouraging more racial and ethnic diversity.
The IRS has allowed employers to offer employees up to $5,250 annually in student loan repayment benefits tax-free through 2025. This provision was included in pandemic relief legislation enacted in 2020, which has encouraged some companies to offer this benefit as a recruitment and retention tool.
However, offering this type of employee benefit can create resentment among those who aren’t eligible for it. This is because some workers have been able to attend college before they start working, and others may not have had the opportunity.
It is also important to note that most companies already offer tuition reimbursement programs, which are similar to student loan repayment assistance programs in that they provide a contribution towards employees’ education expenses. The main difference is that a tuition reimbursement program requires an employee to be an employee and the employer pays out only the amount that they spend on tuition.
Moreover, the Consolidated Appropriations Act of 2020 expanded Section 127 of the IRS code and allowed for employers to offer this tax-free benefit to their employees. This made it more affordable for them to offer this type of benefit, but it is still a relatively small number of companies that currently offer these benefits.
Costs
If you are a student or a borrower who needs help paying back your loans, there are many different options available. Some of these programs offer assistance with interest charges, while others can help you pay off your principal balance completely. You can also choose to refinance your student loans, which can save you money over time.
One way to lower your student loan payments is to refinance your loans into a new 10-year loan with a fixed interest rate. This can save you thousands of dollars in the long run.
Another option is to sign up for an income-driven repayment plan (IDR). These plans are designed to reduce your monthly payments by adjusting how much you pay based on your income.
This can make your loan payments more manageable and will help you avoid defaulting on your loan. However, you must qualify for the program before you can enroll in an IDR.
There are also many other ways to reduce your debt, including repaying part of it through federal or state programs. For example, there is a program called Public Service Loan Forgiveness that offers automatic forgiveness to certain borrowers.
Some employers, such as McLaren Flint Hospital and Carvana10, offer their employees student loan repayment assistance. These benefits can be tax-free, and companies typically cap how much they will help their employees pay off their loan balances.
For example, McLaren Flint provides its employees with $200 per month during their first year and $300 per month in the second year. They top out at $450 per month in their third year.
Employees can also opt to have their employers pay a regular monthly amount toward the total amount of their loan balance. This is a popular benefit for most employees, as it can help them pay off their debt faster and save them money in the long run.
The cost of the Biden administration’s student debt relief program is estimated to cost $30 billion per year over the next decade. This includes one-time costs such as canceling up to $10,000 in federal loans and up to $20,000 in Pell Grants for students, according to Reuters.
Requirements
If you have a lot of student loans to pay off, it’s important to understand your options and how to qualify for help. There are several types of repayment assistance, including federal and state programs, private loan forgiveness, deferment and more.
Income-Driven Repayment Plans: These options can reduce your monthly payments, based on your income and family size. The best way to find out if you qualify is to contact your servicer directly and ask.
These plans are available for many different types of student loans, including Direct Unsubsidized and Parent PLUS loans. They also include the new Revised-Pay-As-You-Earn (REPAYE) plan, which forgives your remaining debt after a certain number of qualifying payments.
Public Service Loan Forgiveness: The PSLF program offers an easier path to loan forgiveness for federal borrowers who serve in the military, a government agency or nonprofit organization for at least 10 years. To get approved for the program, you must meet very specific requirements and make 120 qualifying payments under an income-driven repayment plan.
Some employers offer student loan repayment assistance as part of their benefits package. This can be a great way to make your payments more manageable, particularly if you’re struggling to afford them.
If your employer doesn’t offer this perk, consider asking them if it would be worth negotiating in order to add it to your compensation package. It’s worth it to save on interest and get your loans paid off faster!
Debt Management Resources: There are a number of financial services companies that offer guidance on debt management and other debt relief options. These agencies can help you determine what kind of loan is right for you and how to manage your payments, interest rates and other costs.
Borrowers can put their federal or private student loans in forbearance if they’re experiencing a financial hardship or have another eligible reason for putting your loans in this temporary deferment. You can also choose to apply for an income-driven repayment plan, but keep in mind that these programs may reset your payment amounts or terms.
You should also speak with a student loan expert before making any changes to your repayment plan. These professionals can help you determine which option is right for you and explain your rights.
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