Student Loan Repayment Programs: The Perk That Just Might Change Your Financial Future

Employer student loan repayment assistance programs are becoming increasingly popular. According to data from the International Foundation of Employee Benefit Plans (IFEBP), the number of employers offering student loan benefits more than tripled in the past five years, from 4% in 2019 to 14% in 2024. Not only do these programs make it easier for employees to pay off their student loans, they’re also a boon for employers, as they can help companies find educated workers.

Key Takeaways

• Employer student loan repayment assistance programs can significantly reduce employee financial stress.
• These programs can enhance employee retention and recruitment efforts in addition to potentially increasing productivity.
• Employers need to consider potential tax implications and legal requirements before implementing these programs.

Understanding Employer Student Loan Repayment Assistance Programs

An employer student loan repayment assistance program is a benefit offered by some companies to help workers pay down their student loan debt. This involves either directly putting money toward the employee’s student loan debt or paying staff directly, thereby giving them discretion on how to use those funds.

As an employer, there are four main ways to structure these types of payments: 

• Lump sum: This is the simplest option. For example, employers may offer a lump sum amount for paying down a prospective employee’s student loans as a signing bonus.
• Recurring payments: Alternatively, an employer may prefer to make smaller recurring payments toward reducing their employees’ student debt.
• Benefits exchange: Instead of offering student loan assistance outright, companies can allow employees to trade in other benefits, such as unused paid time off, for student loan assistance.
• Employee matching: To encourage employees to pay off their student loans, employers can match their contributions up to a certain percentage limit, similar to a 401(k) matching program.

Note

Companies may impose eligibility requirements on their student loan repayment assistance programs, such as limiting the benefit to employees who’ve worked at the company for a certain period of time or capping contributions at a specific dollar amount. 

Benefits to Employees

For employees, student loan assistance can be a major perk. It can help you pay down your debt faster, improving your financial situation and freeing up funds to put toward goals like investing or saving for retirement. Plus, eligible contributions up to $5,250 per employee per year are excluded from federal taxes; anything greater than this amount is taxable as wages.

Important

Although educational assistance programs have been around for a while, the ability to use them to repay student loans has only applied to payments made after March 27, 2020. This option will remain available until Dec. 31, 2025 (unless it’s extended).

Benefits to Employers

Employers also benefit from offering student loan assistance. For one, it can help them attract and retain employees. After all, nearly 43 million people have outstanding student debt, contributing to a federal education loan portfolio of over $1.66 trillion.

Plus, helping to alleviate workers’ financial stress can boost morale and productivity. According to Morgan Stanley, financially stressed employees spend over 156 hours per year distracted from work, leading to an average of $3,922 in wasted wages.

The Bottom Line

Employer student loan repayment assistance programs offer benefits to employees and employers alike. They can ease the burden of student debt, support employee well-being, and improve recruitment and retention.

If you’re an employee, reach out to your HR department to inquire if your company offers this benefit and see how you can take advantage of it. For employers, consider implementing a student loan repayment program to support your staff and stay competitive.