Employer Participation in Student Loan Assistance Act H.R. 795

January 2, 2019

Nothing could be better than working for a top company that helps you pay off your student loans, right? Well, a bill was introduced by legislators on 2/1/2017 that is trying to make this a reality. This bill was introduced as the Employer Participation in Student Loan Assistance Act. In addition to the introduction of this Act, the Internal Revenue Service (IRS) also released a private letter ruling. What could these events mean for companies and employees who carry student loan debt?

Employer Participation in Student Loan Assistance Act

First, this bill would amend the tax code by giving tax breaks to employers that provide educational assistance to employees. Educational assistance can be in the form of contributions to student loans through either a payment to the employee or lender.

Specifically, this act would allow employers to offer a tax-free student loan benefit in addition to a salary to its employees.

IRS Private Letter Ruling

Recently, there was a private letter ruling released by the Internal Revenue Service (IRS). If you want to review the contents of the private letter ruling, it can be found here. The ruling allows employers to use 401(k) plans to help employees pay down their student loan debt. It is done by taking the employer 401(k) match to pay down student loans.

Any employee who is eligible for a 401(k) plan would be eligible for this plan. The ruling states that the plan is a voluntary program that employees must elect to enroll. Employees who choose to participate in this plan would be eligible for non-elective contributions made by the employer to their student loan debt. These contributions would be equal to what would have been contributed to a 401(k) plan had the employee opted out of the program.

What Does Student Loan Debt Assistance Mean for Employers?

When managing a business, it is imperative that you stay on top of recent news. Part of staying on top of things includes understanding what challenges your employees face. Both these aspects of operating a business and understanding the needs of your employees, however, can fall hand in hand. When it comes to student loan debt assistance, it can be a huge positive for any business. Not only does student loan debt assistance help employees achieve their financial goals, but it also brings many benefits to a firm.

Offering a student loan debt assistance program does not typically cost a company extra. The employer contributions to student loans are what a company would have typically made as a 401(k) contribution. Therefore the costs of providing 401(k) contributions and student loan debt assistance are equal. Another positive that comes from offering a program like this is that it helps with finding top talent, recruiting, and retaining all-stars. With older generations of employees retiring in record numbers and the workforce shifting to younger millennials, it’s important to take some time to examine the benefits of providing student loan debt assistance.

As many millennials have student loans and report that paying them down is a priority over saving for retirement, companies should begin thinking about reevaluating their benefits package to attract millennials. Finding ways to help this generation pay off student loans could be a big boost to a company’s recruiting strategy. Offering student loan payment assistance could put a company on the cutting edge as far as millennial professionals are concerned.

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According to a benefits report by OneDigital, nearly 80 percent of employees surveyed by American Student Assistance felt that an employer-sponsored student loan repayment benefit would be a deciding factor in accepting a job. This could be a huge differentiator for an employer aiming to recruit the best employees.

The American Student Assistance survey also showed that 86 percent of employees would feel compelled to stay with an employer for at least five years in exchange for student loan repayment assistance. Considering how much companies spend on turnover (recruiting, training, and onboarding new employees), this could mean huge potential savings on talent management costs for employers.

What Does Student Loan Debt Assistance Mean for Employees?

Some companies already offer student loan assistance, but these funds are usually taxed. This type of assistance isn’t as attractive as pre-tax funds because taxes reduce the impact of payments on student loans. Tax-free repayment funds from an employer could be more effective in helping graduates pay down their student loans faster. Employees would avoid incurring taxes associated with this type of assistance.

Many Millennials also face the question of, “Should I save for retirement or pay down debt first?” Student loan debt assistance could be a solution that addresses both concerns. Young employees would have the ability to make substantial payments towards their student loan debt. With these large payments, they will be able to cut down their repayment time. That means young employees would have the ability to start saving for retirement earlier in their career instead of trying to pay down their debt.

Looking to the Future of Employment and Student Loan Debt

With the recent Employer Participation in Student Loan Assistance Act and IRS Private Letter Ruling, it seems student loan debt has become a problem for employees. Since employees are having difficulties with paying down student loan debt, it is time for employers to take action. Not only will employers benefit from offering student loan debt assistance programs, but it will most likely be at little or no cost to them.

If this act becomes a law, experts think that companies will immediately begin to rethink their benefits package and consider student loan debt assistance as a way to attract the best employees. Though it may not be easy for millennials to land a position with one of these companies, they will certainly have another factor to decide in student loan debt assistance when choosing their employer.

Interested in starting a conversation regarding your student loans? Give us a call: 1-844-601-ELFI.

5 Benefits Millennials Look For in Employers

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Flexibility

One of the easiest ways to interest millennials and younger employees is simply to provide them with more flexible working hours. Many millennials view the classic, nine-to-five office grind as an antiquated way to work. As such, they look for jobs that offer them the flexibility to do other things. They don’t just value a stable job; they want their lives outside of their jobs to be fulfilling as well. As working from home becomes the norm for many businesses, it's easier than ever to offer employees a variety of options. Programs like Zoom, Slack, and Microsoft Teams have become standard workplace programs, and they enable employers to provide millennials with the flexibility they desire.

Pet Insurance

Pet insurance is quickly becoming more common among millennial employers. With 82% of millennials saying they’d likely have pets before becoming parents, more and more employers are starting to structure their benefits around the millennial lifestyle. Around 50% of Fortune 500 companies offer pet insurance as a benefit, and the pet insurance market continues to grow every year. As the number of pet owners continues to increase, this benefit grows even more popular!

Student Loan Repayment

It’s no secret that student loan debt is more widespread than ever before. Millions of millennials are repaying thousands of dollars in debt after graduation. With that in mind, one of the best and most effective methods of hiring and keeping millennial employees is through student loan repayment programs. There are several ways to offer this benefit:

Student Loan Signing Bonuses
Employer repayment
Contributions to 401(k) plans

Student Loan Signing Bonuses

The simplest and most self-explanatory of these options is to offer an employee student loan signing bonus. Some companies, for example, pay $1,000 toward new employees’ student loan payments at the time of hire. This method, while great for bringing new talent in, is not as effective in retaining millennial workers.

Employer Repayment

Some employers also contribute directly to their employees' student loans. For instance, Nvidia offers employees up to $6,000 a year to a total of $30,000 for student loans. Notably, Nvidia’s program is one of the most generous, and employees will happily join your company for smaller amounts of support. Even with these smaller amounts, employer repayment is not only a great way to bring in new employees but also to retain them over time.

Contributions to 401(k) Plans

Some employers offer retirement contributions to employees to attract new talent and decrease turnover. When your employees pay off a certain percentage of their student loans, they may qualify for full 401(k) plan matching.

Work with Technology

Millennials are tech-savvy and they look for a tech-savvy workplace. Provide digital documentation and accessible benefits. With widespread technology, it’s easier than ever to design benefits around your millennial employees.

Ongoing Performance Reviews

Millennials operate best with constructive feedback, even more so than previous generations. They want to feel involved in the company, and they want to know how their work is affecting the team as a whole. Millennials are looking to grow in their careers, and your feedback is immensely valuable to them. The best way to do this is to provide regular performance reviews. There’s no reason to wait for feedback when contacting someone takes seconds.

Professional Development

Millennial employees value programs that foster professional development. One common reason millennials job hop is to find new opportunities for growth, but if their current employer already supports career growth, they may be more likely to stay. Mentoring, training and professional development courses are highly desirable for millennial employees. They also encourage employees to learn and grow with the company. These benefits provide effective, budget-friendly ways to keep employees engaged and happy at work. If you’re looking for more tips on how to retain millennial workers, we’ve linked more details here.

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

woman asking employer for student loan assistance

2020-08-05

How to Ask Your Employer to Help Pay Student Debt

These days, employers offer all kinds of benefits to keep employees, from kombucha on tap and innovative new office spaces to ping pong tables and video game rooms. The list of benefits seems to grow all the time. When you think about it, though, how much do you really need that kombucha on tap? Instead, what many graduates need is help with their ever-mounting student loans. In combination with other methods of dealing with student loan debt, employers can play a valuable role in ensuring their employees’ financial stability. Additionally, a recent amendment to the CARES Act allows employers to contribute up to $5,250 to their employees’ student loans, entirely tax-free, through the end of this year. If you’re an employee considering asking for loan assistance or an employer thinking about adding this type of benefit to your portfolio, this is the perfect time to make the leap. While not all loans qualify, as a rule of thumb, most loans that are eligible for federal deferment under the CARES Act are also eligible for tax-free employer contributions. This is a huge benefit for employees, as an employer contribution not only lowers the principal amount owed, but also the lifetime interest they will be required to repay. If you’re an employer, take a look at our ELFI for Business platform to learn about the benefits of offering student loan assistance to your employees. If you’re an employee seeking this type of assistance, then read on, because in this blog we’ll cover several ways your employer may be willing to help you tackle your student loan debt.

Financial Education

Employers have begun to understand that their own financial success is tied to the financial success of their employees. As a result, some employers have begun to offer financial education opportunities. These opportunities come in many forms, including workshops, webinars and even counseling. While many employees already have a firm grasp on financial concepts, these programs can still be incredibly beneficial to those weighed down by student debt as they often cover lesser-known tactics and reinforce familiar strategies.

Student Loan Repayment Signing Bonuses

Another method of helping employees with student debt is the signing bonus. For example, some companies offer $1,000 towards student loans for new hires. This $1000 can drastically reduce the amount graduates pay in interest over the life of their student loans and is an effective way for companies to hire and keep dedicated, hardworking employees.

Employer Repayment

The most exciting benefit employers are beginning to adopt is direct assistance with student loans. Now, in addition to savvy fiscal advice, some companies are backing up their support with dollars and cents. A few companies now offer yearly bonuses to help pay back student loans. One of the most generous of these companies is Nvidia. Employees earn $6,000 a year towards their student loans up to a $30,000 maximum. Several companies offer comparable or lower amounts. Regardless of the repayment amounts, this innovative strategy provides a new way to fight back against student debt. A variation of this policy is occasionally used, as well. In this variation, employees who don’t take their PTO can trade their PTO days for student loan assistance. With many in the United States not taking their PTO days anyway, this is a compelling option for student loan borrowers.

Contributions to 401(k) Plans

It may seem strange for 401(k) contributions to go hand-in-hand with paying off student debt. You might even expect to have to choose between them. If you’re employed by Abbott Laboratories, though, you don’t have to choose. Employees who contribute at least 2% of their pay toward student loans are eligible for the full 5% employer matching in their 401(k), even if they do not otherwise contribute to their 401(k). Abbott Laboratories is the first company to offer this incentive to help employees to pay off student debt, and hopefully many companies will follow in their footsteps. Sadly, these types of programs are not as commonly offered as they should be, but that isn’t necessarily bad news for you. If student loan assistance programs are something that you would like to see at your company, then make an appointment to speak with either your boss or to human resources. In this day and age, the competition for the best employees is fierce, and employers are always looking for ways to keep employees happy. In some cases, it may even be cheaper than a raise. It’s also worth mentioning your interest in such programs while negotiating your salary and benefits package for a new job. They may include it as an additional benefit. If your employer already provides these benefits, that’s fantastic! You’re already one step closer to being unburdened by student debt. If you're curious about how to finish the job and free yourself from student debt completely, one great way to do that is Student Loan Refinancing. You can learn more here.

2020-04-17

Important Details on Employer Student Loan Assistance Programs

For student loan borrowers whose incomes have been affected by the coronavirus pandemic, the new CARES Act promises some much-needed relief. But beyond benefits like payment suspensions and interest waivers, the CARES Act delivers additional help in the form of employer-offered student loan benefits.

By Kat Tretina Kat Tretina is a writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.

For companies looking to attract top talent, it makes sense to pay attention to issues that affect employees’ lives. For young workers, one of the most significant problems is student loans. According to the Brookings Institute, over 42 million Americans have student debt.

To stand out from other employers, offering student loan repayment assistance is a desirable benefit. In fact, one survey found that 60% of adults with student loans said they would think about switching to an employer that offers student loan repayment aid. Now, thanks to the CARES Act, employers can take advantage of tax breaks to help their employees deal with their debt during this difficult time.

Challenges in Hiring

In the Society for Human Resources Management’s 2019 State of the Workplace report, the organization found that companies struggled to find workers to fill high-skilled positions. Employers in different sectors are experiencing a talent shortage, unable to find workers with specialized education and experience.

The industries hardest hit by this phenomenon are healthcare and technology, particularly in data analysis, science, and engineering.

The biggest reason companies said they struggled to hire suitable candidates? Competition from other employers. With a limited pool of skilled workers, companies have to work hard to stand out from other employers to get the best employees.

For skilled workers with student loan debt, one way employers can improve their compensation package is by offering student loan repayment assistance. And thanks to the CARES Act, that’s easier than ever for employers.

What is the CARES Act?

The COVID-19 virus pandemic devastated the United States’ economy, causing millions of people to lose their jobs or to experience reductions in income. With so many people struggling to make ends meet, the government created the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide economic assistance.

On March 27, 2020, President Trump signed the CARES Act into law. As part of the CARES Act, the following changes were made:

- Stimulus checks up to $1,200: Individuals will receive up to $1,200 based on their 2019 tax returns, if they have already filed their returns. If not, the amount of the check will be based on their 2018 tax returns.
- Extended unemployment protection: Eligible workers who are now unemployed can receive an additional $600 per week for up to four months.
- Waivers of penalties for early withdrawals from retirement accounts: If people tap into their retirement accounts to make ends meet, the 10% early withdrawal penalty is waived.
- Federal student loan payments suspended until September 30, 2020: Federal student loan payments on Direct loans and federally-held FFEL loans and Perkins Loans are suspended for six months. During that time, no interest will accrue on the loan, and borrowers will still get payment credits toward loan forgiveness and loan rehabilitation programs.

How Does the CARES Act Affect Employer Student Debt Programs?

However, another benefit that is commonly overlooked is the expansion of employer student loan repayment assistance programs.

Under the CARES Act, employers can contribute up to $5,250 toward an employee’s student loans from March 27 until December 31, 2020, and the payment is excluded from the employee’s income. It is also tax-free for the employer, since it’s not subject to payroll taxes up to the contribution threshold.

The CARES Act amended the tax code to incorporate provisions of yet-to-be-passed Employer Participation in Repayment Act, allowing employers to pay off up to $5,250 of an employee’s debt tax-free.

Currently, approximately eight percent of employers offer student loan repayment assistance and can take advantage of this benefit. However, it’s available to more companies if they wish to use it.

Previously, the tax treatment of employer student loan repayment assistance programs created a burden on both employees and companies, so this is a substantial benefit that may encourage more employers to offer this perk to their workers.

ELFI for Business

If you are a business owner or a human resources manager looking to improve your recruitment and retention efforts, offering student loan repayment benefits can be a powerful tool. If the idea of building your own program seems overwhelming, consider taking advantage of the ELFI for Business program.

The ELFI for Business program is designed to help employers recruit and retain top talent. In one survey, 86% of workers reported that they would commit to an employer for five years if they received help with their student loan payments. And, three in five survey respondents said paying off student loans is a priority over saving for retirement.

Employer contributions can make a dramatic difference on your employees’ debt. For example, let’s say your employee had $30,000 in student loans at 6% interest and a 10-year repayment term. If you contributed $100 per month toward the loan’s repayment, the repayment term would be reduced by three years. And, the employee would save $11,363.

ELFI for Business also gives your employees other tools to manage their debt, including:

Newsletters
New hire onboarding booklets
Webinars
Onsite consultations

Customized Student Loan Refinancing Advice

Employers that participate in the ELFI for Business program will also have access to loan advisors to help employees considering student loan refinancing.*

If your employees have student loans with high interest rates, refinancing can help them reduce their rate and save money over the length of their loan. And, by lowering their interest rate, more of their payment will go toward their principal instead of interest charges, so they can get out of debt faster.

ELFI customers have reported that they are saving an average of $272 every month and should see an average of $13,940 in total savings after refinancing their student loans¹. When combined with employer contributions, refinancing can be an effective tool to pay off student loan debt.

Helping Employees During COVID-19

During these difficult times when so many are reeling from the coronavirus outbreak, offering benefits like student loan repayment assistance can make a major impact on your employees’ lives. Not only can it help recruit and retain good employees, but it can also build your company’s reputation and brand.

If you’re interested in introducing student loan repayment benefits in your workplace, contact ELFI for Business.

*Subject to credit approval. Terms and conditions apply. ¹Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 2/7/2020 and 2/21/2020. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors. Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Employer Participation in Student Loan Assistance Act H.R. 795