Student loan debt repayment programs is a benefit that is on the rise and expected to become more prevalent in the future.
WorldatWork’s “2019 Total Rewards Inventory Program and Practices” survey found that 9% of employers offered the benefit in 2019, which was up from 6% in 2018 and 4% in 2017. Additionally, a Willis Towers Watson survey found that 32% of employers plan to make contributions to their employees’ student loans by 2021.
A recent survey by Gift of College reinforced that these programs are on the rise, likely because employees crave them. The “Paying for College Survey” revealed that 75% of the 1,100 employees surveyed said employers should help pay for college and/or pay down student loans. The survey also found than 53% of employees think it would be helpful for their employer to provide payroll deduction for 529 plans.
“Families are struggling and looking for savings solutions that don’t saddle them with debt,” said Wayne Weber, CEO and founder of Gift of College. “Workplaces have stepped in to offer a range of benefits for employees, and it seems logical for them to provide programs that support employees trying to save and pay for college. Student loan debt in the U.S. is topping nearly $1.6 trillion — and the time to put an end to this vicious cycle is now.”
The report also revealed that many Americans (67%) are unaware of the student loan debt provisions provided in the CARES Act, which could be valuable to those saddled with student loans. The bill opens avenues for employers to provide tax-free student loan benefits to employees through year-end under IRS 127 Educational Assistance Programs. Additionally, the legislation suspends payments and waives interest on federally held student loans through September — which makes the impact of employer contributions even more valuable.
“This is a once in a lifetime opportunity for employers to reward employees,” said Norma Sharara, a managing director at BDO. “You can limit the benefit perhaps to employees who are emergency personnel/first responders — this is something that employers that are in those lines of business could be doing. If you’re trying to motivate your workers and keep them working, perhaps offering this special tax-free student loan benefit is a good idea.”
Of those who have student loan debt, 62% feel overwhelmed by the amount of student debt they are facing. Additionally, 42% of respondents said student loans create feelings of stress, and 12% report this stress interferes with their ability to focus at work. Plus, 27% report their student loan debt interferes with their ability to make a major purchase, and another 27% report it interferes with their ability to save for retirement. More than half (51%) of respondents say they are facing student loan debt for themselves or a loved one, and 21% owe over $51,000 in student loans.
If employers offered 529 savings contributions, 29% of respondents said they would stay at their job, 24% said they would take a job, and 18% said they would go the extra mile at work. Likewise, if employers offered student loan assistance, 34% said they would be more likely to stay at their job, 33% said they would be more likely to take the job, 22% say they would be more likely to work go the extra mile at work.
Lastly, the survey noted that of those who have 529 plans, 44% contribute automatically through their checking or savings accounts, and only 22% contribute through automatic payroll deductions at work.
About the Author
Brett Christie is the managing editor of Workspan Daily.