Move over 401(k) and health insurance plans, there’s a new company benefit tailored to the millennial workforce.
The “Student Loan Repayment Benefit” is the name, and it is being offered by employers, who contribute a certain dollar amount per year toward paying off an employee’s student loans.
So far, only 4% of U.S. companies offer the perk, but 8% of companies with 40,000 employees or more have it.
The unemployment rate in February of 2018 is only 4.1% — the lowest it’s been since 2000 – which means companies are having a harder time finding people to hire. That puts more bargaining power with workers, and it’s one reason why companies are turning to benefits like student loan assistance to sweeten the deal.
Student loan help targets millennials, who are now the largest generation in the workforce. It’s estimated that millennials will make up 75% of the labor pool by 2025, and with 70% of college students graduating with loans, the benefit could replace 401(k) and health insurance as the No. 1 bargaining chip.
Twenty-somethings are young and healthy so insurance plans don’t have the same lure as they do with older workers. Same goes for retirement and 401k. Too far down the road to interest millennials today.
Student loan assistance, however, is something that would have an immediate impact on their lives.
Student loan payments are a big reason millennials are struggling to save enough to buy a home, build an emergency fund or even consider investing in retirement. Paying off a portion of their debt would free up some extra cash to do those types of things that are vital aspects of the economy.
Entrepreneurs have recognized the opportunity and started companies to facilitate the student loan repayment industry. Some employers are offering the benefit without a middleman, but many companies are turning to these types of organizations that act as a go-between for employers and loan servicers.
Companies that provide student loan repayment services to employers include:
- Student Loan Genius
- Fidelity (Student Debt Employer Contribution Program)
Student loan refinance companies have jumped into the action with SoFi at Work and CommonBond For Business, which allow employers to make contributions to their employees’ loans if they have been refinanced through SoFi or CommonBond.
Student Loan Repayment plans could become a lot more popular in the coming years pending legislation that has been submitted to Congress. The proposed bill, called the Employer Participation in Student Loan Assistance Act, would extend the tax exclusion for educational assistance to loans as well.
Currently, employers can pay for their employees’ college tuition (up to $5,250/year) and not count it as paid income. If the bill passes, it would give the same exclusion to contributing to student loans. The bill was proposed in early 2017, but hasn’t been voted on.
How to Pay Off Student Loans without Employer Repayment Help
Since 96% of employers don’t offer student loan repayment benefits, it isn’t much help to a lot of you, but you could always start by asking your employer if they’re willing to offer it. Gradify, Tuition.io and Student Loan Genius make it easy for companies to get started.
For the rest of you, research the ins and outs of student loans with this guide to paying back student loans. It will help you understand the process and make smarter decisions regarding loans.
Federally backed loans have a six-month grace period after graduation before you begin repaying them. Use that time to come up with a strategy.
The default plan is the 10-year Standard Repayment Plan, which all students are automatically enrolled in unless you apply for a different repayment plan. The standard plan requires 120 equal monthly payments over 10 years, but that might not suit your financial situation.
Other student loan repayment plans are based on a percentage of your income, which can make the monthly payment more affordable. These plans are also tied to student loan forgiveness and discharge programs, though it is difficult to qualify for forgiveness or discharge.
List of Companies Offering Student Loan Assistance Benefits
Here is a list of some of the employers offering student loan assistance benefits:
- Fidelity – $2,000 per year for up to five years
- Aetna – $2,000/year up to $10,000 total
- Kronos – $500 per year
- Nvidia – $6,000 per year and up to $30,000 total
- Penguin Random House – $1,200 per year and up to $9,000 total
- Pricewaterhouse Cooper (PWC) – $1,200 per year for up to six years
- Chegg – $1,000/year with no cap
- Staples – $1,200 per year for three years and up to $3,600 total
- First Republic Bank – $100 per month in the first year, $150 the second year and $200 each year after that until the loan is paid off
- BP3 Global – $1,200 per year
- ChowNow – $1,000 per year
- CommonBond – $1,200 per year until the loan is paid off
- Connelly Partners – $1,000 signing bonus paid toward student loans, $100 per month and an extra $1,000 after five years of working with the company
- LendEDU – $2,400 per year
- Natixis – $1,000 per year and up to $10,000 over 10 years
- Powertex Group – $1,200 per year for up to six years
- SoFi – $2,400 per year
- io – $1,200 per year
- Gradifi – $3,000 per year and up to $10,000 total
- Martin Health Systems – $2,000 per year