Ask your HR department about student loan repayment assistance benefits.
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The CARES Act allows employers to contribute $5,250 per year toward each employee’s student loans.
Student loan repayment assistance is a newer workplace benefit offered by some companies.
You can use this simple email template to encourage your employer to start offering it.
It’s safe to say student loan debt is one of the largest financial burdens Americans face today, even with the $10,000 to $20,000 of student loan forgiveness President Biden announced on August 24.
According to the Education Data Initiative, the average student loan payment is $460 per month, and it takes the average borrower 20 years to pay off their debts. Additional data from the Federal Student Loan Portfolio shows that 63.9 million borrowers under the age of 61 owe a total of $1.4 trillion in federal student loans.
But your employer may be able to offer you some relief.
Your employer can pay $5,250 per year directly to your federal student loans
At the beginning of the pandemic, the CARES Act was passed to get economic aid to Americans fast, including stimulus checks and money for small businesses. But one section of the legislation didn’t get quite as much attention: Section 2206, which allows employers to make up to $5,250 in tax-free annual payments directly to their employees’ federal student loans.
Employers were able to offer this kind of benefit long before the pandemic. According to the SHRM Employee Benefits Survey, 8% of companies nationwide offered student loan repayment assistance in 2019 and 2020. The main difference under the CARES Act is that employers’ contributions are completely tax-exempt. That means employees won’t pay tax on this added “income,” and employers don’t owe payroll taxes on these funds.
The CARES Act was only supposed to be in place for 2020, but under the 2021 Consolidated Appropriations Act, the combined spending bill and continued coronavirus relief funds, this provision has been extended until December 31, 2025.
Tax strategy and benefits lawyer Joseph P. Yonadi, Jr. at Squire Patton Boggs LLP says the $5,250 annual student loan repayment assistance is an added benefit on top of an employee’s salary, health insurance, and retirement benefits, meaning this isn’t money that comes out of your paycheck — it’s cash from your employer that goes directly to your loans.
Sometimes, benefits like equity stock options are only available to higher-ranking employees who have been at the company longer. Student loan repayment assistance, however, is available to employees regardless of rank and salary.
Yonadi says, “Educational costs have skyrocketed over the last 10 to 15 years. It’s a benefit for the employees because it alleviates some of that burden, and it’s a benefit for employers, too, for retention.”
Because of job-hopping normalized during The Great Resignation, employers are struggling to find ways to keep employees happy and loyal to their companies. Student loan repayment assistance could surely make a good incentive to get employees to stay at the company longer.
Yonadi adds, “We in the industry are hopeful that this benefit will stay forever, and that hopefully they’ll increase the $5,250 limit.”
Some companies offer a 401(k) match for paying back your student loans
Outside of federal policy, tech companies have been creating solutions for employers to be able to offer this benefit to their employees.
For example, employee benefits platform Vault makes it easy for employers to contribute between $50 and $500 monthly toward employees’ student loans. Vault even offers a 401(k) match program where employers can contribute a matching dollar amount based on how much employees pay on their student loans. The 401(k) match program rewards employees for paying down their student loans and incentivizes them to pay their loans down quickly by contributing more to the employee’s 401(k).
Vault co-founder Tony Aguilar says, “One thing that we found is that employees, if they’re asking for it, it’s something that HR and the company feels like they need to provide. It’s getting asked by current employees and people who are interviewing. It’s a consistent thing that keeps coming up. We have this new workforce coming in just asking for and forcing this benefit, which has been awesome to see.”
Ask your HR department about student loan repayment assistance using this email template
When it comes to asking your employer for this benefit, Yonadi recommends being open and transparent. He adds, “You can simply say, ‘I’ve got some debt burden from this education that you require me to have for this position. I want to save for retirement and pay off my debt in a reasonable amount of time. How can you help me?'”
If you want to ask your employer to consider offering student loan repayment assistance, here’s an email template you can use:
Dear _______,
I recently learned that employers can offer student loan repayment assistance as an additional benefit.
Section 2206 of the CARES Act states that employers can make tax-exempt payments of $5,250 per year directly to each employee’s federal student loans. This was only supposed to be in place in 2020, but it was extended to December 31, 2025 through Section 120 of Division EE in The Consolidated Appropriations Act of 2021. A summary of the provisions can be found here, on the National Law Review website.
Personally, I have (insert federal loan total) in federal student loans and my monthly payments are (insert monthly payment). I’m sure I’m not the only one who feels the pressure of student loan debt, so I wanted to speak up and advocate for the needs of employees at this company.
Will (insert company name here) consider offering this benefit in the future?
Best,
(your name here)
Ask about student loan repayment assistance while interviewing for jobs
If you’re interviewing for a new job, be sure to ask your potential employer the following questions:
Do you offer student loan repayment assistance benefits?If they don’t know about student loan repayment assistance benefits, you can add: Under Section 2206 of the CARES Act and Section 120 and Division EE in The Consolidated Appropriations Act, employers can make tax-exempt contributions up to $5,250 each year toward student loans. Will you be offering that in the future?What other benefits do you offer for people who have student loan debt?