Here’s What Companies Are Doing to Tackle Student Loan Debt
By Matt Konrad
Updated November 2019
By Matt Konrad
At more than $1.5 trillion, national student loan debt has surpassed credit card debt, and is second only to mortgages as Americans’ largest source of consumer debt. Soaring college costs and reduced state investments have made student loans a massive burden on graduates—especially millennials, who are struggling to buy homes, pursue advanced degrees, contribute to their childrens’ education, save for retirement or invest in their futures as a result.
It’s a big problem that requires innovative solutions. Fortunately, some forward-thinking initiatives are emerging, designed to help recent grads get started in their careers without spending every extra cent on potentially crushing loan debt.
How are employers tackling the student loan crisis?
On the private-sector side, more and more employers are adding student loan repayment benefits to their compensation packages. The idea is a win-win for both companies and employees: a company hires a recent graduate, and the new employee’s benefit package includes a contribution to repaying their student loans.
In 2016, PricewaterhouseCoopers (PwC) became one of the first major multinational companies to offer student loan repayment. The company’s program has been a runaway success, paying more than $25 million in employee debt and helping nearly 9,000 members of its workforce. More companies have followed in their wake, and the list now includes household names like Peloton, Penguin Random House, Live Nation, Estee Lauder and Hulu. (Fidelity Investments found so much buy-in to their program that they established a business unit to help other companies do the same.)
Employer-provided student loan repayment programs differ in some details; as The Ascent reports:
Employers vary in requirements and how they disburse student loan repayment assistance. Most of these benefits are paid monthly, but some employers pay qualifying employees a lump sum annually. Many have a lifetime cap on benefits, which is usually $10,000.
Some companies may require employees to work a certain number of hours or be with the company a certain number of months to qualify for student loan repayment assistance. Others have no such restrictions.
One important note: these repayments are currently treated as taxable income, though savingforcollege.com reports “There is bipartisan support for adding an exclusion from income for employer-paid student loan repayment assistance. The most popular proposal would amend the law providing an exclusion from income for employer-paid tuition assistance.
How do repayment benefits empower employees?
The benefit to employees—especially millennials struggling with high loan debt—is clear. According to a NerdWallet study, “undergraduate student debt holders could shave off nearly three years of payments and have $4,100 cut in interest from what they owe by taking advantage of a typical employer contribution program”—and that’s if the graduate can only afford to make the minimum monthly payment. What’s more, students who can get rid of their loans more quickly can also start contributing to 401(k) or other retirement plans sooner, ensuring that the benefit pays off for years to come.
Student loan benefits can be just as powerful for the companies that offer them. An astonishing 89% of job seekers told the Beyond career network that they believe student loan repayment should be included in a standard benefits package. (10% even ranked it above paid vacation as a “most important” benefit.)
In 2018, the number of companies providing student loan repayment doubled—but that’s still only 8% of employers. If you’re looking for a serious recruiting advantage, a loan repayment program is a powerful differentiator.
How can refinancing student loans help?
In addition to helping students repay loans, the private sector has created a number of initiatives to help students refinance their loans on better terms.
Just as borrowers regularly refinance mortgage loans, companies like SoFi and CommonBond are offering refinancing for federal and private student loans. Here’s how Robert Farrington explains it for Forbes:
“With student loan refinancing, you actually take out a new loan, and use that loan to pay off all other existing loans. This could be done for one loan or many. Some borrowers refinance in order to consolidate multiple loans. The benefit of refinancing is that you are able to change your loan terms – simply because you are taking out a brand new loan. With the new loan, you can decide on length and interest rates that make sense for you. Many times these will be lower than your current rates (which is what makes your payment lower as well).”
Refinancing isn’t always the best option, but in cases where it makes sense to refinance student loans, the decision could potentially save students thousands of dollars in payments. (Incidentally, SoFi offers student loan repayment benefits to its own workforce, too!)
For years, the student loan debt crisis has loomed large over the nation’s economy—and our graduates. But with these new efforts, from the federal government down to individual companies, we can make significant strides toward helping students complete their college dreams and manage their level of debt.