Nearly 70% of college students with bachelor’s degrees graduate with student loans. The Federal Reserve reports that over 44 million American adults owe $1.5 trillion in student loans. Many employers are exploring options to assist employees in repaying student loans. Here are four things employers can do to help workers with student loan repayment.
1. Use match funds
Employers can help millennials repay student loans and save for the future by educating them to use their 401(k) matching funds.
- Most employers offer a 401(k) matching funds program. Each year employees leave nearly $24 billion in match funds on the table.
- Many millennials don’t take advantage of match fund programs. They have little money left after making their monthly student loan payment and covering basic living expenses.
- To help employees, employers can offer a student loan repayment benefit, like Employee Choice. Employees can choose to apply their 401(k) match funds toward a student loan payment. Or, they can direct half of the match funds toward a student loan payment and save the rest for retirement.
2. Support tax-free incentives
Many employers would like to contribute directly to help employees repay student loan debt. But they are waiting for the government to approve these payments as a tax-free contribution. A new bill before the U.S. House of Representatives and the Senate would allow companies to contribute up to $5,250 tax-free. Employers can voice their support of this bill by contacting their state representatives.
3. Educate employees on interest deductions
The student loan interest deduction applies to most loan repayment plans. But employees may not know about this option.
Employees who are not dependents of their parents can claim the deduction on the interest part of their payment. This applies even if their parents made some of their student loan payments.
Employers also should remind employees to take advantage of tax deductions on loans available in some states.
4. Offer financial well-being programs
Employers can help employees improve their financial well-being by offering financial services, programs, and benefits that employees can tailor to their needs.
Because employees are paying off student loans, they may not be saving for retirement. Most employees who are saving for retirement, do it through employer-sponsored programs. So, offer a range of options to help employees pay off debt while also putting money away for the future.
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