Today, 45 million Americans are saddled with student debt, averaging about $40,000 per person. Financial wellbeing is a core part of employee wellbeing, yet according to our data, only 10% of employees say they’re prepared to fully cover a large ER bill and only 30% are able to always put money away into savings.
To say that many employees are struggling with financial stress would be an understatement. As employers look for more ways to infuse empathy into their benefits program to support their employees’ total wellbeing, add student loan repayment to the top of your list.
Not only do student loan repayment programs offer an additional financial resource for employees, these programs can also provide additional tax benefits to employers, depending on how much you choose to contribute per year per employee. But, chief among the list of benefits and advantages a financial wellness benefit offers employees is empathy in the form of less stress about looming bills and debt.
45% of employees said they’d feel panicked if faced with a $6,000 unexpected medical expense. Multiply that expense by 6 and you’ve got the average student loan debt. We’re pretty confident in applying that math to the stress associated with student loans, too.
Benefits are the number two reason employees stay or leave a company, second to pay. When employers offer a robust suite of benefits, it’s the equivalent of saying “We see you, we hear you, we want to support you.” Financial benefits are no exception. In fact, according to a study by PeopleKeep, 26% of Gen Z employees and 27% of Millennial employees rank student loan assistance as “very” or “extremely” important.
Second to employees, though, is a tax advantage for employers. The Consolidated Appropriations Act of 2020 allows employers to qualify for a tax benefit when they contribute to their employees’ student loan repayment. Employers can provide up to $5,250 annually, tax-free, towards employee educational loan and tuition repayment benefits. Sounds like a win-win benefit to us!
Employer-sponsored education benefits have been around for decades. Student loan repayment assistance is a newer benefit to the lineup. Tuition assistance and student loan repayment assistance are similar, but different, benefits. Let’s break it down:
However, not all loans qualify for employer-sponsored student loan repayment programs. The IRS has strict guidelines in place for tax-free repayment. Under the IRS Tax Benefits for Education publication 970, the guidelines for student loan repayment eligibility state that loans must be:
Financial stability is top of mind for many Americans, especially as student loan payments kick back in. If we had to sum this up into a single word, “stressful” would be it.
A diverse total rewards program, however, can help alleviate a lot of the stress and anxiety that comes with preparing for large or surprise expenses. Our Benefits Insights data has made it clear that while many employees are doing their best to build up financial reserves and savings, not everyone has the means to do so. Making financial wellbeing—from 401k matching to student loan repayment assistance—a table stake in your total rewards program is one of the most empathetic ways employers can meet their employees where they’re at with meaningful resources and support to navigate their financial needs.
Learn more about how you can provide financial wellness benefits for your employees with education assistance programs.