Corporations and other employers nationwide seem split between two schools of thought. There are those that offer, fund, and pay unimaginable benefits for the well-being of their employees, but there are also those that do the bare minimum in order to retain workers.
I have worked for both types of firms, and I can unequivocally say that the first type of employer is better. The interesting thing is that, over the years, the structure of these benefits has changed considerably.
In fact, I worked for a company that offered employer sponsored student loan repayment. Here is everything you need to know about these programs and their benefits.
What is employer student loan repayment?
Employer student loan repayment, sometimes referred to as employer-sponsored student loan program, is any sort of program offered by your employer to ease the burden of your repayment. By offering financial assistance, employers are able to better the personal lives of their employees, which helps them to attract and retain talented employees.
About a decade ago, employees started looking for ways to offer student loan assistance as part of a competitive benefits package.
Fast forward to the onset of the Covid-19 pandemic and the passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020. Within the CARES Act, it is stated that, through the end of 2025, employers can pay off up to $5,250 in student loan debt for their employees within a calendar year, while assuring the employee doesn't have to pay income tax on the received benefit.
This is big news!
What is the CARES Act?
The CARES Act was a comprehensive stimulus bill passed by the United States Congress, and signed into law by President Donald Trump, in response to the onset of the COVID-19 pandemic.
A $2 trillion stimulus bill, it was signed into law on March 27, 2020 the CARES Act had a number of notable provisions, outside the world of student loan debt, such as:
Economic impact payments (commonly known as stimulus checks)
Paycheck Protection Program (PPP loans)
Extended unemployment benefits
Increased funding for healthcare organizations, including providers, hospitals, vaccine research, and testing
There were also student debt related provisions. First was the start of the federal student loan moratorium period where interest would not accrue and federal borrowers would not be required to make payments.
And second is the employer student loan assistance statue, the one that allows them to make up to $5,250 per year in payments for you. This section was passed under Sec. 127(c) of the IRS tax code, which excludes highly compensated individuals and certain executives from taking part in the program. This ensures that those that need the assistance are the ones that receive it.
Student loan repayment benefits change lives
I've seen student loan repayment benefits change lives. Early on in my career, I worked in financial services for an industry leader. At the time, the company was offering up to $10,000 in employee sponsored student loan repayment.
I started as part of an entry level college new hire class, so I got to meet and work with about fifteen others that had recently graduated from colleges all over New England, just like me.
Many of my peers weren't afraid to talk about their debt and how it had already hindered their ability to do things with friends and plan for their financial futures. But then something amazing happened, as we learned about the company benefits that we were/would be eligible for, including employer student loan forgiveness.
My colleagues began to move out on their own, leasing their first apartments, buying their first cars, and preparing for their financial goals/priorities after student loan debt. Employer paid benefits like these can be that powerful.
And it can be a win-win for employers too! Since my colleagues were aware of the vesting requirements needed to retain eligibility, they also began to plan out and visualize spending their career there.
How do employers pay student loans?
There are a number of different ways employer student loan repayment can be structured. Among the most popular are:
Cash payments (monthly or annual): Sometimes, companies will structure their benefits such that you'll receive a monthly or annual stipend to use towards their student loans. You may need to meet certain requirements in order to receive these payments, but this will be employer specific.
Match programs: Some businesses have structured their student loan programs similar to 401(k) plans, where you'll be expected to contribute a certain percentage of of your paycheck towards your loans. If you contribute a certain percentage, your employer will provide you with a match to use towards your loans. You do not want to pass up any match dollars you are eligible for.
Swap programs: Other companies structure their repayment assistance as an option should you forego another benefit. For instance, you may have the option to exchange a week of paid time off for $2,000 in student debt assistance, to name one example.
Pros to employer student loan forgiveness
In case I haven't been clear, there are so many pros to taking loan assistance from your employer. Among them are:
Financial and mental relief: Like I witnessed with my colleagues, you'll likely feel both financial and mental relief. You can begin to think through about your financial future, travel plans, retirement, and more!
Increased satisfaction of work: Regardless of your company's motive for offering this benefit, you are more likely to feel satisfied and content at work, regardless of your actual happiness in your role. Now, you should never place financial benefits over your own mental health, but these benefits may make an okay role worth staying around a little longer than you otherwise may have.
While these pros far outweigh any potential cons, there are a couple of unintended consequences that are possible if you do take student loan repayment help.
These include:
Limited professional growth if you're required to stay in your role for longer
Obligation to remain with an employer
The potential for a company to change to a less lucrative program in the future
As such, it is possible that you may find yourself in a position where you may not want to take employer sponsored student loan forgiveness. This includes if you need to job hop for some reason, whether it be a toxic situation, a better offer, or something else altogether.
What companies offer student loan assistance?
Many employers now offer student loan help to qualifying employees. According to Student Loan Hero, in 2015, just 3% of employers offered any assistance to their employees. But by 2021, 17% of employers did, and many more have plans to add a benefit in the near future. Some of the most notable, in no particular order, are:
Fidelity Investments
Aetna
Google
Hulu
New York Life
1. Fidelity Investments
Like we mentioned, Fidelity Investments offers debt assistance to their employees, to the magnitude of $15,000 over five years. New hires are eligible on day one of their employment.
As is the case with many of the employers I've singled out on this list, Fidelity's student loan assistance program was established prior to the passing of the CAREs Act in 2020.
2. Aetna
This health insurance giant, now owned by CVS, matches student loan payments made by employees eligible to take part in the program. Aetna will match payments up to $2,000 annually, up to a total of $10,000 annually.
3. Google
A new addition to this list as of September 2020, eligible Google employees may receive up to $2,500 per year in student debt assistance. The program is available to all full-time employees, but not to contractors or those working on temporary contracts.
4. Hulu
Hulu, a streaming company known for rivaling Netflix, Peacock, and others, offers employees up to $1,200 per year in help repaying student debt, up to a lifetime maximum of $6,000.
5. New York Life
Employees of New York Life may be eligible to receive up to $10,200 in employer student loan repayment if they work for the following NY Life businesses:
Index IQ
New York Life Insurance Company
NYL Investors
New York Life Investment Management
Employees also need to be non-officers.
For a more complete list of notable employers offering student loan repayment assistance, click here.
Tips for employees to repay their student loans
If you are fortunate enough to work for an employer offering student loan repayment assistance, you'll want to make sure to take full advantage of whatever package your employer may offer.
To take full advantage of the benefits you have access to, you'll want to consider these two tips:
Read the fine print on program specifics
Understand the time sensitivity
1. Read the program's fine print
Make sure you understand all of the details of your company’s program, including how it works and what types of loans are eligible for repayment. In most instances, you won't uncover any red flags, but you still want to be sure that the assistance you think you're going to get is truly what you get.
For example, you'll definitely want to verify that there aren't any taxable consequences of taking employer student loan repayment help.
Another thing to check for is any potential vesting periods, a length of time that you'll need to remain employed for to either qualify for the benefit or get to keep any benefits that were paid on your behalf.
2. Understand CARES Act timing
It is also really important to understand that time is of the essence. Remember - the CARES Act allows for employees to offer employees up to $5,250 per year in tax free benefits, but only through the end of 2025.
This means that you don't have time to wait, or else you could be costing yourself thousands of dollars in student loan aid.
What happens at the end of 2025 is anybody's best guess at the moment. It will likely come down to which political party has control of the United States Congress and White House.
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