Student Loan Repayment Benefits – Is It Worth The Investment?
When I graduated college, my student loan debt prevented me from doing many things: getting a place of my own, saving in my 401(k), and much more. As we all know, the situation is much worse for those who are just entering the workforce now. College tuition has skyrocketed in recent years, leaving millions graduating with very large student loan debts.
Student loan repayment programs could provide important retention and attraction tools for employers during this hot talent market. The SHRM article, Student Loan Aid Improves Millennial Retention and the Forbes article, Student Loan Repayment: The Hottest Employee Benefit Of 2017 highlight that while only 4% of employers offered assistance with student loans in 2016, these benefits may be on the rise. There are some very large companies (Fidelity, Aetna, Staples) on the list of employers providing student loan payments to their employees, and they are often designed as yearly benefits encouraging retention.
To a millennial entering the workforce, this benefit is very attractive, and many expect it will grow in popularity in 2017.
My question is, is it worth the investment?
Unlike 401(k) employer contributions and tuition reimbursement benefits, there is unfortunately no tax advantage to student loan assistance benefits. It actually serves as taxable income to the employee. So essentially it is the same as receiving a bonus payment each year. Just because an employer is calling the payment “student loan assistance” does not really mean anything to the employee other than that of a cash payment. Millennials should be aware that the same or a greater “bonus” or cash payment amount from another organization holds the same or greater value than the “student loan assistance”, at least under the current tax laws. Ultimately, while student loan assistance could be beneficial to employees, it’s important to consider this drawback.
It will be interesting to see if employers offer this benefit in addition to competitive salary and bonus payments in the increasing war for talent. In addition, if the tax laws are changed to allow for favorable tax treatment in the future, this benefit will sky rocket and become a pillar in the benefits space. Stay tuned…