As an employer, the compensation you offer your team members may go far beyond a simple hourly wage or salary. Benefits like health care and retirement plans for full-time employees are common, even amongst small businesses.
To help companies attract and retain high-quality candidates, lots of other creative perks have popped up as well. One of these is student loan assistance, where the employer pitches in to aid employees’ efforts to dial down their educational debt.
While it’s not exactly a widespread practice, a growing number of enterprises have been adding student loan assistance to their benefits packages. This assistance is meted out in a variety of ways, from matching employee payments to direct flat-rate contributions.
Of course, like all benefits programs, student loan reimbursement isn’t free — no matter how you slice it. Here’s some food for thought if you’re considering implementing such a program at your own business.
Pros of offering student loan reimbursement
While student loan forgiveness programs do exist, they’re often limited to specific demographics or industries. For those who fall outside of those eligibility requirements, a workplace student loan reimbursement program at work can be a major draw — especially given America’s $1.5 trillion in educational debt.
Offering student loan reimbursement can help your company:
Become more attractive to job seekers. Obviously, to someone on the job market, the more benefits, the better.
But student loan reimbursement is a particularly hot commodity — perhaps specifically because it’s not very widespread yet. Though the number of companies offering the benefit doubled from 2018 to 2019, just 8% of businesses offer some kind of reimbursement, according to the Society for Human Resource Management. In another study by health care company Abbott, about 60% said they’d jump ship from their current job for one that helped pay for student loans.
Attract more educated applicants. Along with making you more attractive to applicants, it stands to reason that student loan reimbursement programs would bring more attractive applicants to you — after all, in many cases, more debt corresponds to more schooling.
Which is one reason many of today’s hottest brands are bringing student loan repayment into their suite of benefits. Amy Stoldt, the senior vice president of the popular in-home fitness company Peloton, called the decision to implement such a program “a complete no-brainer” — one that she anticipated will help the firm “broaden our recruiting pool, as well as retain top talent in our workforce."
Increase employee diversity. Diversity is more than just a buzzword. By ensuring you’ve got a multiplicity of backgrounds and experiences on your team, you stand a better chance of succeeding in a heterogeneous and evolving world.
Data shows that both women and racial minorities carry heavier student loan debt burdens than their white, male counterparts, so offering this perk could bring more diversity into your corporate family.
Enjoy higher team morale and productivity. Student debt can have a major impact on mental health, derailing lives and plans with its constant weight. And while some stress is important for productivity, too much of it makes for lack of concentration and engagement — or even sick employees.
A student loan repayment initiative could help ease this all-too-common mental burden, making for a happier, healthier, harder working office.
Cons of offering student loan reimbursement
Even with such a convincing list of pros, it’s important to remember that offering any new benefit comes with some drawbacks, as well.
Along with the good it can do, offering student loan reimbursement can also:
Cause your company to incur higher employment costs. While all benefits cost money to offer, student loan reimbursement can be a pretty expensive program to implement. If your firm doesn’t have the capital available to sustain a repayment program, you may find yourself needing to make budget cuts elsewhere that also affect employees.
Many companies circumnavigate this problem — or at least put a ceiling on it — by imposing certain rules and limitations. For instance, college textbook sale and rental company Chegg offers only up to $3,000 or $5,000 in student loan repayment per employee per year, depending on role and seniority.
Upset team members to whom the benefit doesn’t apply.
Some experts worry that student loan repayment is an unfair benefit; after all, even in our current climate, not all employees have student loans. Access to extra repayment funds could strike older or debt-free employees as unfair, especially since, unlike some other educational perks, it does nothing to augment workers’ skillsets.
However, many other office perks benefit some employees more strongly than others. For instance, paternity leave is useless for employees who don’t plan to have children, but is still considered by many applicants to be a highly attractive benefit.
Put an additional tax burden on employees — and not count as a deduction for you. As it stands, student loan repayment programs are considered taxable income for employees, which means your team could see higher withholdings or even reach a higher tax bracket as a result of the perk. What’s more, these programs aren’t considered deductible payments on the business’s end of things, either.
However, a bill has been introduced to Congress which would allow employers to offer up to $5,250 in student loan assistance per year per employee, totally tax-free. This would be accomplished by expanding the verbiage in laws on employer-provided tuition assistance, which is already considered tax-exempt.
Only you and your HR team have the details necessary to make smart decisions for your business. Implementing a student loan reimbursement program, like any other perk, can have serious consequences on your budget, hiring practices and even overall company culture.
However, in today’s competitive market, this unique benefit gives your firm a way to stand out from the crowd — not to mention it also represents a spirit of help and compassion where it’s sorely needed.