Have you heard about the newest employee perk?
What's one of the most cutting-edge employee benefits right now? Company-provided student loan assistance for employees who are paying back student loans.
With a record amount of student loan debt attached to the incoming workforce (visit finaid.org to see a student debt clock that now tops $1.3 trillion), companies that rely on a college-educated workforce--and want to attract and retain the best workers--are starting to offer student loan assistance to meet this immediate financial concern of many employees.
How do these programs work? Generally, an employer will contribute a certain amount each month toward an employee's student loans, typically from $100 to $250 per month, up to a lifetime cap (for example, $10,000). Programs may restrict participation to employees who have been with the company for a minimum period of time, and may require employees to remain at the company for a certain period of time after they receive loan repayment benefits.
But participants beware: Unlike matching 401(k) contributions that companies may give to employees, money given to help repay student loans is considered taxable income. Yet for college graduates facing thousands of dollars of debt and years of loan repayment, this employee benefit can be an attractive perk. Along with the actual financial help, borrowers may get a psychological boost from knowing that they have a plan in place to successfully pay off their loans and that their employer is invested in the outcome.
Even with the early hype, company student loan repayment programs are still a relatively uncommon employee benefit. According to a 2015 employee benefit survey by the Society for Human Resource Management, these plans were offered by only 3% of the more than 450 companies surveyed. Essentially, a handful of large employers that hire a large number of college grads are at the forefront of this trend.
Industry observers expect a lot of pent-up demand for this employee benefit as millennials' student debt burdens continue to garner widespread attention and employee retention efforts intensify as the economy improves. A company's contribution probably won't cover 100% of a young employee's student debt, but it might make a meaningful and welcome dent.