Friday, November 11, 2016


You’ve probably heard of the statistics about Americans owing nearly $1.3 trillion dollars in student loan debt. Maybe you’ve heard that the average undergraduate student in the class of 2016 has $37,000 dollars of debt hanging over their head.  So how are all of these students going to pay all of this debt off and buy a house and move out of their parent’s basement? Student loan reimbursement may be the next big employment perk.

Currently, only three percent of employers offer student loan reimbursement as a benefit to their employees. While student loan reimbursement plans have been available for years through public service loan forgiveness and loan repayment assistance programs, it has historically been associated with jobs that benefit the public interest. When it comes to the private sector, they’ve been slow to catch up. That doesn’t mean they aren’t on their way though. Price Waterhouse Coopers and Chegg are both large private companies that have gotten on the bandwagon on this one.

Generally, these repayment programs operate where your employer agrees to pay a specific amount toward your student loan debt or reimburses you for up to a specific amount of what you paid toward your student loans in any given year. But the amounts a company will pay, and for how long they will pay, vary by each company. This could be a lump sum of $5,000 dollars at the end of 5 years of $1,000 dollar payments or it could be done year to year.

This can be especially enticing where an employee believes they will stay with a company for a while. Generally, employees need to make regular payments toward their debt as well as the employer and the employee may have to have been at the company for a specific amount of time before they will be eligible for the reimbursement plan. But, student loan reimbursement addresses a huge concern of many employees, especially millennial.

Probably the biggest factor to consider is whether the benefit is tax-free. When it comes to qualified tuition assistance, it is tax-free up to $5,250 dollars. When it comes to student debt reimbursement, the benefit is unfortunately taxable. An employer may deduct the tax directly from the payment, deduct from an employee’s paycheck, or the employee may be responsible for payment when they file their taxes. Employers are not currently entitled to a deduction for loan reimbursement either.

There is still hope. There are bills in congress to amend the Internal Revenue Code to exclude from gross income amounts paid by an employer on the employee’s student loans. As more and more students come out of school with debt, which is definitely on the rise, it is becoming increasingly part of employer’s recruitment and retention initiatives. Employers should consider offering this benefit in the future to address one of the biggest financial concerns of many employees new to the workforce.