A young woman with long dark hair sits at a table annd works at a laptop. She has one hand on the laptop keyboard; the other hand uses a yellow highlighter on a piece of paper.
There are several options that your business can take to help with student loans, including direct repayments, matching contributions, and benefit trade-ins. — Getty Images/Sergey Mironov

About 44 million Americans are struggling to pay off their ever-growing burden of student loan debt, owing an estimated total of $1.67 trillion. More and more companies are offering student loan repayment assistance as a benefit to their employees to alleviate this issue.

How can employers help employees repay their student loans?

As student loan repayment becomes a more common benefit offering among larger companies, small businesses vying for the same talent may want to consider what their competitors are offering. Some companies, like Google and New York Life, offer a simple maximum contribution amount toward student loans, while others, like Aetna, Chegg, and Fidelity, take a tiered approach depending on whether the employee is still in school and what their job level is.

[Read more: 5 Benefits to Offer Employees If You Can't Afford Raises]

Types of student loan repayment assistance

There are a few different types of options for student loan repayment as an employee benefit, and most of them fall under one of two main categories: direct repayment programs or discretionary programs.

A direct repayment program involves an employer putting cash payments directly toward an employee’s student loan. You can do this by setting up recurring payments or matching the employee’s contributions each month. On the other hand, a discretionary program allows employees to allocate their company’s discretionary benefit dollars to student loan debt (as they would with other benefits like wellness benefits or PTO). This offers the employee more autonomy over their benefits.

Some specific types of student loan repayment assistance include:

  • Trading in PTO/vacation time: If an employee doesn’t use all their PTO or vacation time by the end of the year, let them “cash it in” and apply it to their student loans rather than carrying it over to the next year.
  • Matching contributions: As you would with a 401(k) plan, you can set up a student loan repayment program that allows your employee to contribute their earnings to their student debt, and you can match their contributions at a percentage you feel comfortable with.
  • Signing bonus: When an employee first joins your company, offer them a lump sum payment upfront for them to put toward their student loan debt.
  • Recurring payments: A simple way to offer student loan assistance is to provide recurring payments toward the debt. You can send payments directly to the lender or to your employee via their monthly paycheck.

A direct repayment program involves an employer putting cash payments directly toward an employee’s student loan.

Tips for offering student loan assistance as an employee benefit

Decide on your monthly contributions per employee

On average, businesses that offer student loan assistance start around $50 to $100 per employee month, which can save employees thousands of dollars in interest over time. For budgeting purposes, you will also likely want to set a maximum employer contribution rate to ensure you have the funds to cover the program.

Determine who is eligible

Decide whether you will offer your student loan repayment benefit to all employees or just full-time workers, and at what point in their tenure they will become eligible. You may also wish to stipulate whether employees can get tuition help with current degree programs or if they must be currently repaying a loan for a degree they’ve already earned. It’s also important to keep in mind that certain types of student loan repayment assistance programs, especially those that involve matching contributions similar to a 401(k) plan, may be subject to certain nondiscrimination testing under the new SECURE Act 2.0 of 2023.

Consider the tax implications

The updated Consolidated Appropriations Act states that, through December 31, 2025, employers can give each employee $5,250 per year in tax-free student loan assistance under a Qualified Educational Assistance Program. This annual amount is considered separate from an employee’s regular wages, but payments beyond this may be subject to payroll taxes.

Student loan repayment assistance is a desired and appreciated benefit for many workers who are carrying student debt. This benefits investment can help your small business compete with larger employers and ultimately attract and retain more talent.

[Read more: 6 Inexpensive Perks and Benefits to Offer Your Employees]

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