Employer Student Loan Repayment Program: 5 Tips for 2020
Employer Student Loan Repayment Program: 5 Tips for 2020

Employer Student Loan Repayment Program: 5 Tips for 2020

Repayment programs: a competitive advantage?

As the war for talent continues to heat up, companies are getting increasingly creative in the perks they offer employees. A free gym and snacks are a couple of good ones, but with student loan debts skyrocketing, a welcome perk for college graduates is a student loan repayment program.

The student loan epidemic

Currently more than 44 million Americans owe more than $1.56 trillion in student loan debt, up from $1.52 trillion just last year. It’s the second highest debt category—behind mortgages—and default rates have been on the rise. According to the Institute for College Access and Success, the average class of 2017 grad owes a little over $28,500. More than 2.5 million workers are saddled with loan amounts of more than $100,000. It’s not too surprising to understand the enormous appeal a student loan repayment program would have to job candidates.

One benefit–5 years of employment.

Companies that offer student loan debt relief can more easily attract and retain talent. In fact, studies indicate that 86% of workers between the ages of 22 and 33 would commit to an employer for five years if the employer offered a student loan repayment program. Another aspect of the employee experience to consider when thinking about implementing a loan repayment program is engagement. The very real fear and anxiety suffered by workers who are stressed out about defaulting on their student loan payments can take a toll on their performance.

5 tips to help employees repay their student loans

Creating a program to help recruit the brightest and the best to your company can easily be achieved. They quickest way to set one up is to take a look into financial organizations that already have a program management platform in place. These programs enable your company to make after-tax contributions towards your employees’ loans.

If you want to DIY it, a few points to consider include:

  1. Determine the monthly payments you want to contribute. Most organizations start off at $50-100. While this is a seemingly small amount, the contribution can help employees save thousands of dollars in interest.
  2. Set a cap on the maximum amount you’ll contribute.

  3. Figure out who will be eligible to receive the benefit. Keep in mind that the nondiscrimination rules that apply to other benefits programs—such as 401(k) plans and health insurance—do not apply to student loan repayment programs.
  4. Decide if you want to tie a specific work commitment from the employee in exchange for loan repayment assistance.
  5. Remember, the payments made toward a student loan are considered wages, so they’re still subject to federal income and payroll tax withholding.

401(k)s and student loan repayments: Recent updates

Last year, the IRS approved a novel method Abbot Laboratories developed to help its employees pay off their student loan debt. They make a matching contribution that equals 5% of the employee’s compensation if:

  • the employee makes a contribution to their 401(k) that equals at least 2% of their compensation, or
  • the employee makes a student loan payment that equals at least 2% of their compensation (even if the employee doesn’t contribute to their 401(k).

The program is an attractive benefit, especially for those employees who think they can’t save for retirement due to hefty loan payments. This program helps the them pay off their loans without sacrificing the contribution from an employer match. And because the company’s contributions are payroll tax free and not subject to federal income tax withholding, the program offers significant tax advantages.

Paycor Can Help

Need help recruiting & retaining talent? Interested in creating a competitive benefits program? Paycor can help! Talk to a consultant today and learn why 30,000 organizations trust Paycor as their HR and payroll provider.


hr benefits administration software

More to Discover

Webinar: Benefits in a Pandemic: What HR Leaders Need to Know

Webinar: Benefits in a Pandemic: What HR Leaders Need to Know

Building a benefits program for a diverse workforce has always been a top priority, but now it’s become both more important and complex. With so much change and uncertainty at work and home, employees are struggling to cope with isolation, loneliness and added stress. They may wonder if their employer is doing enough to help. This is an opportunity to come through for your people. It’s an opportunity to reevaluate your benefits offerings to make sure they deliver real value. With the right guidance and planning, your benefits program can be an unbeatable competitive advantage that drives retention and helps your company live up to its ideals and stand out from the crowd. Watch this webinar to learn new insights on the benefits that...

For our HR & Benefits Technology Partners: The State of American Business in 2021

For our HR & Benefits Technology Partners: The State of American Business in 2021

Paycor surveyed 2,600 leaders of medium and small businesses (your clients and prospects) to find out what they are thinking at the close of the year and how they’re planning for 2021. Paycor delivers these insights to our broker partners to help you better understand what your clients need from you at this critical moment. Here’s an executive summary of the report. For more, click on the download button at the bottom of the page. Part 1: Benefits A majority of your clients and prospects (86%) are concerned about mental health in the workplace, but nearly half (45%) are “not sure” how benefits can address these concerns. Part 2: The Finance/HR Relationship Roughly 40% of respondents agreed that HR and Finance are working more closely...

Webinar: Look Forward Webinar Week - Finding Top Talent in a Hypercompetitive Market  - 12/7 @2pm ET

Webinar: Look Forward Webinar Week - Finding Top Talent in a Hypercompetitive Market - 12/7 @2pm ET

This session is eligible for 1 HRCI and 1 SHRM credit.Recruiting may be the single most important function of an organization. That’s why your recruiting strategy must be intentional and strategic. During this interactive webinar, we’ll look at ways to create a never-ending candidate pipeline, interviewing techniques for success and ways to evaluate talent to ensure you hire the best possible candidate. Register for the webinar today! Speaker: Lori Kleiman Lori Kleiman is a business expert with more than 25 years of experience advising companies on HR issues. Her background as a human resources professional and consultant gives her unique insight on how HR professionals and executives can work together effectively to achieve business...

The State of American Business: 2021

The State of American Business: 2021

Paycor surveyed more than 2,000 HR and Finance leaders about their plans for the new year. Download our newest report to find out what they said. Here are just a few insights you’ll discover: The one thing HR and Finance don’t agree on The one thing Finance leaders say they do better than HR leaders The #1 thing all business leaders are most concerned about heading into 2021 You’ll also get a lot more on what your peers are thinking about remote work, benefits and compliance.