You have or soon will complete your college commencement. Unless you’re about to begin graduate or professional study, you’re no doubt job hunting. If you have college debt, be sure to learn whether prospective employers offer student loan repayment assistance among their employee benefits.
Currently, only a few employers help employees pay down student loans. A recent survey found that just 4% of companies were doing this in 2017. But the number of companies offering this benefit is expected to grow in 2018, and some of America’s leading corporations — Aetna, Fidelity Investments, New York Life, Pricewaterhouse Coopers, Prudential, etc. — already provide it. So do some nonprofits and local governments such as the City of Memphis, Tennessee.
How does repayment assistance work on postsecondary debt? Your employer contributes a certain amount above and beyond the monthly payment you’re required to make. It’s contribution generally occurs on a monthly basis, although there may be annual and/or lifetime caps on its total contributions.
Employer-provided loan repayment assistance means your loans will be paid-in-full faster. Also, since the interest you pay is a product of how much you owe and for how long you owe it, it’ll also lower the amount of your lifetime earnings that you’ll devote to repaying your debt.
The Internal Revenue Service treats employer college debt payments as “taxable income” for the employees receiving this benefit, so put some money away to cover the increased federal income taxes you’ll pay on this amount. Nevertheless, any additional taxes you pay will be considerably less than what you’d spend if you paid 100% of your debt without employer assistance.
Why would an employer spend money to help repay its workers’ student loans? Think about it. Businesses in need of highly educated workforces gain a competitive advantage when recruiting the world’s most knowledgeable and skillful people — U.S. college graduates — 70% of whom borrowed while in school. Also, college educated employees are among the most mobile workers in today’s workforce but, being young and healthy, they often gain more from repayment assistance than medical, dental, or other types of benefits. So a company offering repayment assistance over a numbers of years also gives itself an advantage in retaining them.
You’ll likely earn less early in your career than at any other time. Employer-provided student loan repayment assistance can help resolve this while reducing your student debt, so carefully consider it as you evaluate prospective employers.
College Affordability Solutions brings 40 years of student loan experience to the table when consulting with ex-students about ways to manage their college debts. To arrange for a free consultation, email firstname.lastname@example.org.