When you have a growing list of other financial obligations, it can be difficult to balance student loan repayments. However, some companies go the extra mile to provide support.
According to figures from the Federal Reserve, the total amount of student debt in the United States has reached an all-time high of $1.75 trillion. In response to this, employers are increasingly providing relief as American workers find it increasingly difficult to repay their student loans.
What has changed in the field of student loans
A recent survey found that only a small percentage of companies were helping to repay private student loans as a bonus. However, recent changes have shed light on just how much student debt affects ordinary Americans. A provision to suspend payments, interest charges and collections on federal student loans held by the Department of Education was part of the CARES (Coronavirus Aid, Relief, and Economic Security Act) when it was passed. in March 2020.
The CARES Act also allowed companies to exempt up to $5,250 in annual student loan payment assistance from their employees’ income and provide it to their workers. The law on consolidated credits has extended the deadline for this clause from the end of 2020 to 2025.
In response, a recent study found that the proportion of employers offering student debt assistance as a benefit has more than doubled. Moreover, more and more companies are planning to do so.
Here are some innovative strategies employers are using to show you how companies are helping their workers.
1. Allow staff to trade unused vacation for student loan repayments.
Staff members carry forward unused paid leave (PTO) each year. Under this program, employees can convert a certain number of deferred PTO hours into student loan repayment. Some employees pay up to $1,000 or $2,000 a year under such a program.
2. Offer a signing bonus that can be used to pay off student loan debt.
In addition to this signing bonus, some companies offer a second incentive for the same purpose after employees have worked for the company for five years.
3. Link 401(k) contributions to student loan repayments
Student loan repayments have significantly hampered the ability of recent college graduates to save for retirement. A recent study found that 73% of student borrowers aren’t making the most of their retirement resources. Some companies offer a solution to this problem
Specifically, the companies make a 5% contribution to each employee’s retirement plan, provided the employee makes student loan repayments equal to or greater than 2% of eligible earnings.
In addition, employees are not required to make contributions to the pension plan to receive the matching contribution. Even the IRS grants special permission to provide the benefit.
4. Repayment of student loans.
Private banks and asset management companies present their initiatives to help repay student loans. These organizations offer monthly payment benefits like other private employers do, but they are not limited to recent college graduates. These banks also offer help to parents who have obtained student loans to pay for their children’s studies.
These employees receive a monthly amount to be allocated to their school loans during their first year of employment, whether they are parents, graduates or undergraduates. This amount increases each year until the loan is repaid.
5. Exchange student loan repayments for company stock.
Employees with a certain number of years of employment could be eligible for awards of company stock each year, which they could sell to pay off student loans.
These and other programs are part of a growing trend by companies to help employees pay off student debt. As these companies become more creative and innovative, it is likely that job seekers in the future will see this as one of the most important perks to look for in a company.