If the biggest employee benefit you receive is when your company bothers to fill the toilet paper rolls in the employee bathroom, you might not want to read this: Google is paying off student loans for its employees.
Well, it’s not wiping out the debt entirely, but the company recently announced it would match up to $2,500 a year in loan debt for eligible workers.
Google’s move is part of the budding trend of student loan repayment benefits being offered by companies as America comes to grip with its student loan crisis. About 45 million people owe $1.6 trillion in college loans. That’s the second-largest chunk of debt behind mortgages and about $600 billion more than Americans owe on credit cards.
Heck, Google is worth about $920 billion. For $1.6 trillion, you could theoretically buy the company and have enough left over to buy everybody in Texas a new Toyota Camry.
Not that you’d want to buy everybody in Texas a new car. But if you’re struggling with student loan debt and looking for a potential way out, you might want to read on.
How Many Companies Pay Off Student Loans?
More companies offer pet insurance than offer student loan help, but that’s changing as prospective employers grasp the scope of the crisis.
About 8% of companies have student loan benefit programs, which is about 7.9% more than just a few years ago. Of course, it wasn’t too long ago when the average student debt could be paid off in a couple of years.
Now the average debt is about $36,000, according to the Department of Education. Helping employees pay that off is a great recruiting tool for savvy companies.
Among those that have instituted student loan programs are: Aetna, Fidelity Investments, Estee Lauder, New York Life, Natixis Global Asset Management, Penguin Random House, PricewaterhouseCoopers and Staples.
One of most generous is Nvidia, a computer gaming manufacturer. Its employees can apply for $6,000 a year to help repay student loans, and up to $30,000 total compensation.
A study by Dice Salary Report found 48% of technologists are interested in student loan repayment as a perk. That’s more than paid vacations (44%) and way more than 401k plans (30%).
Those figures probably aren’t much different for workers in other industries. If your company doesn’t have student loan help as part of its benefits package, talk to your boss or Human Resources representative about starting one.
Can an Employer Pay Off Student Loans Tax Free?
One reason more companies don’t have student loan programs is they aren’t tax deductible for employers. There are rumblings that might change, however.
Bills have been introduced in the past two Congressional sessions to loosen the regulations on deductions. They haven’t passed, but the legislation makes sense when you consider employers can deduct tuition assistance.
If Uncle Sam can give companies tax breaks when they pay new tuition bills, shouldn’t companies get breaks when they pay for old tuition bills?
Payments are not tax deductible for employees. A $2,500 student loan payment is treated like $2,500 income by the Internal Revenue Service, which means you could possibly be pushed up into another tax bracket, if you do get this added to your benefit package.
Does The Military Pay Off Student Loans?
The U.S. military has a variety of plans that help pay off or forgive student loans, but please note, joining the Marines is not like going to work at Staples.
Serving in the armed forces can be a fabulous career, but it’s also a bit riskier and more demanding than selling office supplies. So, if you’re worried about making your next student loan payment, don’t rush willy-nilly to the nearest recruiting station and ask where your M16 is.
There’s a lot to think about here. But it is a fact the military has some of the most generous student loan programs in existence.
Active duty personnel in the Army and Navy are eligible for up to $65,000 in loan repayment. It’s $30,000 in the Coast Guard and $10,000 in the Air Force. There are enhanced benefits if you serve in hostile fire areas.
The federal government doesn’t limit student loan help to our fighting men and women. People working in fields like medicine, teaching and governmental affairs can qualify for the Public Service Loan Forgiveness program.
What Happens If You Never Pay Off Your Student Loan?
If you’re thinking getting out of a student loan might be easy, think again. Whether your loan is from the federal government or a private lender, both parties are hell-bent on getting their money back.
If you default on a federal loan, the government can (and will) garnish your wages, your Social Security check and your tax refund.
If it can’t recoup the money that way, the government can hire a third-party collection agency to hassle you into paying.
Private lenders will also sick a collection agency on you. If that doesn’t work, they will go after you in court and try to garnish your wages.
And if you think declaring bankruptcy is a way out, it’s time to think again. The laws that allow student loans to be discharged are very limited. Chances are you’ll have student loan debt after your bankruptcy case is over.
What Billionaire Is Paying Off Student Loans?
The graduating class at the Morehouse College May 2019 commencement ceremony got a nice surprise. The speaker, Robert Smith, announced he would pay off everyone’s student loans.
The average student at Morehouse, a historically black college in Atlanta, graduates with between $35,000 and $40,000 in loan debt. The tab for the 400 graduates that amounted to $34 million.
Smith is the founder of the investment firm Vista Equity Partners and is worth about $5 billion. When you have that kind of liquidity, $34 million was like picking up a lunch tab at Outback. But still, it was a life-changing moment for 400 lucky grads.
“We’re looking at each other like, ‘Is he being serious?'” salutatorian Robert James said. “That’s a lot of money.”
What If You Don’t Work For Google Or Have A Billionaire Benefactor To Pay Off Your Student Loan?
Google is a trendsetter in more ways than one, so it probably will accelerate the student loan payoff movement. But that train is just now leaving the station, and it might not arrive at your workplace any time soon.
In the meantime, you have three choices:
- Don’t pay: That’d be a bad move. As we discussed earlier, you won’t get away with it. All you’ll really do is destroy your credit score and the likelihood you’ll ever get a loan with a decent interest rate.
- Keep paying and hope for government relief: There’s growing talk in Washington D.C. of limited student loan forgiveness, but it’s hard to say exactly what that might mean to individual borrowers. What is certain is there are ways to cut your monthly bills and help pay off your student loans faster. How?
- Consult with a certified credit counselor: If you’re buried in debt, the key to digging out is lowering your interest rates. Student loan rates are not negotiable, but they also are relatively low. The average rate for undergraduates is 4.66%.
A counselor can look at your financial situation and come up with a suitable strategy. He or she might recommend a debt management program, which addresses interest rates that can be reduced. That’s primarily credit card debt. If that and other bills are consolidated into one monthly payment, your overall payment could be appreciably lower. That savings can be put toward your student loans debt.
In other words, if your employer has no plans to emulate Google and help pay off your student loans, you have to help yourself.
You’d do that if there wasn’t any toilet paper in the employee bathroom. Cleaning up your debt is a lot more important than that.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].
- Criss, D. (2019, September 20) $34 million: How much one man is paying to wipe out a graduating class' college debt. Retrieved from https://www.cnn.com/2019/09/20/us/morehouse-student-debt-trnd/index.html
- Hornsby, T. (2020, October 28) Student Loan Debt Statistics in 2020: A Look at The Numbers. Retrieved from https://www.studentloanplanner.com/student-loan-debt-statistics-average-student-loan-debt/
- Benefits, M. (ND) Will The Military Pay Off Your Student Loans? Retrieved from https://militarybenefits.info/military-pay-student-loans/
- N.A. (October 13, 2020) Most Valuable Companies in the World - 2020. Retrieved from https://fxssi.com/top-10-most-valuable-companies-in-the-world