Millions of American workers are being crushed under the weight of student loan debt. According to Student Loan Hero, 44 million borrowers owe a total of more than $1.48 trillion.
The Pew Research Center says that 37 percent of adults between the ages of 18 and 29 carry student loan debt, and among those with at least a bachelor’s degree, the figure climbs to 53 percent. Workers with student loan debt often struggle financially and are almost twice as likely to take on more than one job to help pay the bills.
As student loan debt reaches a crisis point, many are looking for solutions. One of these solutions is leading to a hot new trend in employee benefits.
Student Loan Repayment Benefits
Many companies have offered tuition assistance that helps employees attend college, but this trend is different. Instead of helping people pay for classes they want to take, it helps them pay back what they already owe for degrees they’ve already earned.
Although the benefit has been getting a lot of attention recently, Debt.org reports that only 4 percent of U.S. companies currently offer it. These companies include Penguin Random House, Aetna, Staples and Fidelity.
Companies that offer the benefit set a limit on the maximum amount they’ll contribute each year, often around $1,000 to $2,000, although some are more generous. Some employers also set limits on the total number of years the benefit can be used, or on the total amount that can be earned over the lifetime of the benefit.
Although only a small minority of companies currently offer student loan repayment benefits, Employee Benefit News reports that this could change soon. This is partly due to proposed legislation, which could change the way the benefit is taxed.
Right now, employers may decide that the benefit is too expensive to offer because of a lack of tax incentives. The Employer Participation in Student Loan Assistance Act seeks to change this.
Introduced on February 1, 2017, by Rep. Davis Rodney, the bill would extend the tax exclusion for employer-provided education assistance so that it includes student loan payments. Under the current law, employers can offer $5,250 in tax-exempt tuition reimbursement.
According to Davis, “By simply broadening the use of an existing tax code provision, we can help graduates pay down their loans more quickly and prevent loan defaults that taxpayers are often on the hook for.”
While employers and employees would both likely welcome the change, no action has been taken since the bill was introduced.
Have questions about your employee benefits package? Heffernan Insurance can help. Contact our Benefit Advisory Team to learn more.