Move over, ping pong tables and gym memberships. Actually, it might be time to retire those stale perks altogether. The one benefit employees really want in the workplace — and is valued just as much as existing employee benefits like health insurance and 401(k) programs — is student loan repayment assistance.
Declared 2017’s hottest employee benefit, more corporations are stepping up to implement student loan repayment plans. Let’s quickly break down how this works. For those employees carrying student debt, the business offers a certain amount of money to go towards their loan payments. This amount of money can be provided in monthly payments or throughout the course of a year, usually accompanied by a lifetime cap.
Beauty company Estée Lauder provides employees struggling with debt $100 a month to go towards their student loan payments with a lifetime maximum of $10,000 dollars. Other businesses, like tech company NVIDIA, go bigger. The company currently allows recent college graduates (within the last three years) the ability to apply for a $6,000 reimbursement each year to go towards their loans with a $30,000 cap.
The best part, aside from making a dent in student loan debt? None of the money needs to be repaid back to the company.
Small businesses watching major corporations lead the pack in student loan repayment options might be inspired to join the movement. However, with fewer financial resources at their disposal, is it possible that they can, or should, offer this benefit to their employees? Here’s what startups need to keep in mind before they begin recruiting talent with the promise of wiping their debt slates clean.
Keep in mind that there’s no tax incentive (yet) in it for businesses.
According to CNBC, one of the greatest hurdles surrounding whether or not businesses can offer repayment assistance is a lack of tax incentives. Unlike health insurance or retirement plans, businesses won’t receive tax breaks for contributions used to help repay student loans. Employees receiving these repayments must also report them as income to the IRS during tax season, too.
The good news is that certain bills, like the Employer Participation in Student Loan Assistance Act, are being introduced into Congress. This particular measure would allow the repayment assistance employees receive from their employers to be tax-free for up to $5,250 each year. The act has yet to pass, but it has received the support of major corporations like Starbucks — along with countless workers currently in debt.
What factors will determine your repayment plan?
Let’s just say that even though there aren’t any tax incentives for your business, you decide to offer repayment benefits to your employees anyway. What’s your strategy? Unlike universal benefits like healthcare, debt repayment may only impact certain individuals. Businesses must determine who within the company receives the benefit and what the benefit itself will shape up to look like.
- How long will you make the payments? Will you offer a monthly payment amount or yearly? How much will your lifetime repayment cap max out at? Have you considered upping the ante each year, too? Consider First Republic Bank, which provides student debt-saddled employees with $100 a month for repayment in the first year. For the second year, that monthly payment amount gets bumped to $150. Then, $200 a month for every year afterwards for the life of the loan.
- Who qualifies for repayment assistance? Some companies target recent college graduates within a certain span of years, but what about those with outstanding debt that graduated earlier? Do you need to be a full-time employee? Does an employee need to work at the business for a certain number of years in order to receive repayments? How will this benefit affect other financial aspects, such as raises or bonuses?
- Does the debt need to be your own? The Atlantic brings up an excellent point that not all student debt is accrued by the student. Marketing agency Connelly Partners already offers their team $1,000 for their student debt repayment upfront. Now, they’re thinking about creating an assistance program for parents of college graduates. If these older employees took out the loan or cosigned for their child, should they be eligible for student loan repayment plans, too?
Ultimately, repayment is a brilliant way to retain talent.
CNBC reported that seven in 10 college graduates have debt, often federal student loans. This debt keeps them from achieving adult milestones — like home ownership or starting a family — earlier in life. They must focus on repaying their loans first, then start saving for their future.
For many individuals though, these loans are their future. That’s why it’s so relieving to see businesses take notice and offer to help. It’s a win-win situation for both parties. Businesses are able to better retain talented employees and help them get rid of debt so they can focus on vital investments. As for the students, they’re no longer in this alone. Their employer is on their side, able to help pay off their debt quickly, so that they may start the rest of their lives.
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation and Deborah at @deborahsweeney.