With so many people entering the workforce with a large sum of student loan debt, companies are now starting to considering offering a new benefit — student loan assistance. Along with 401(k) and other offerings, student loan assistance may soon become a common offering to help attract new talent.
Crippled by Debt
There are currently 44.2 million Americans with student loan debt. There is over $1.48 trillion in student loan debt. The average student loan debt that graduates at four-year colleges leave with is currently at $28,650 according to Inside Higher Ed. With so many leaving college with student debt, companies are slowly picking up on the benefit of offering student loan assistance as a perk that can attract new talent.
Student Loan Assistance in Action
According to the article “Student loan assistance may become as popular as 401(k) plans,” they offered an example of this new perk in action. Jessica Crowley who works for New York Air Brake is getting student loan assistance. Recently implemented in the company, New York Air Brake is paying Crowley $166 a month toward her student loan balance. As noted by David Pratt, who is a professor at Albany Law School and studies employee benefits, stated: “this is certainly emerging as a new and very important benefit.” Recent graduates are seeing this as meaningful as 401(k) plans, for it eases the burden on them to pay off their student loans while they are working.
However, this may not necessarily be the way to overcome the growing student loan deficit. As noted by Pratt, it appears that we are treating the symptoms rather than the disease itself. The main problem is the rising costs of higher education. Until the cost of getting a college degree is reeled in, then there is little chance that the ballooning debt will cease.
Right now, only about 4 percent of companies are offering such a benefit. However, those that are fortunate to be at a company that offers such a perk will find that it makes a dent. The example that they offer in the above-mentioned article is as follows: “if someone has a student loan balance of $26,500 on a 10-year repayment term with a 4 percent interest rate, a $100 a month contribution from his or her employer would free them from their debt three years earlier.”
One of the biggest hurdles that this new trend has to overcome is the lack of tax benefits. Currently, companies do not receive any sort of tax incentive for offering such a contribution to their employees. Moreover, employees have to report it as income to the IRS. However, there are a number of bills that are aimed at tackling this issue. Starbucks and Verizon have already voiced their support for such a measure. It would indeed leverage companies to consider offering this benefit, possibly spurring a growth in its offering in the private sector that will make it as commonplace as other employee benefits.
