Employers Step Up and Stand Out with Student Loan Help
Here's why more companies are taking an active role.
Your staff could very well be loaded up with student loan debt. Heck, you might even have some yourself. None of this is news. But as student loan debt continues to snowball in the U.S.–up to $1.75 trillion as of July 2022– you may be less familiar with the all-hands-on-deck mentality many employers are now taking toward the problem. Companies are getting off the sideline and taking a more active role in helping their workers manage student loans. Here’s how and, more importantly, why.
Why companies are adding student loan help to their benefits toolbox
The story of how companies came to help with student loans is really the story of the 401(k), or more specifically, why so many employees weren’t touching theirs. A mystery at first, the answer has grown increasingly clear: it’s tough to save for the future when you’re still paying off the past. For employees with student loans, every dollar in their paychecks can represent a zero-sum decision. Do they service their student loans or contribute to their 401(k)?
In recent years, however, both employers and employees have signaled a growing expectation to work together on the issue. More than half (57%) of employees believe their company should help them pay off student loans according to exclusive Betterment research on employee financial wellness.
Some companies have taken the issue to heart. By complementing their 401(k) with student loan management, they can offer a more holistic compensation package, one that accounts for the drag student loan debt now has on the workforce as a whole. The benefits are numerous:
Recruiting and retention advantages
When it comes to benefits packages, 401(k)s have become the standard. Translation: beyond a generous match, they don’t always differentiate your company from others. Offering something of unique value can not only attract top talent but keep it. Nearly 9 out of 10 (86%) of young workers say they'd stay at least five years with a company if it helped with student loans.
Two-way tax benefits
Just like with 401(k)s, offering your staff a student loan management tool is one thing, but the real magic lies in the match. Why is that? It unlocks tax perks for both parties. Thanks to legislation passed by Congress in 2020 (aka the CARES Act), companies who maintain a qualified Section 127 Program can make tax-free annual contributions of up to $5,250 toward their employees’ student loans. This translates into a benefit that lowers both your company’s payroll taxes and your employees’ income taxes. This tax-free treatment is approved through 2025.
What to look for in a Student Loan Management tool
First and foremost, you want a streamlined admin experience. For many benefits admins, adding another vendor on top of their 401(k) provider is a non-starter. With Betterment, you can get both benefits synced and served up at the same time. If you’re already familiar with Betterment’s 401(k) product, Student Loan Management now slots into the all-in-one dashboard.
Last but certainly not least, you want a tool that also makes your employees’ lives easier. Similar to the admin experience, we give your participants a clearer financial picture of their student loans and 401(k) all in one place. We also go the extra mile by helping them balance the competing demands of debt and investing.
If you’re interested in bringing Student Loan management to your team, please get in touch.
Student loan management services made available in partnership with Spinwheel Solutions, Inc.