Student loan assistance, which started as a niche offering by a handful of companies, is finding its way into the mainstream menu of workplace benefits.
“This is certainly emerging as a new and very important benefit,” said David Pratt, a professor at Albany Law School who studies employee benefits.
This year, Fidelity began to offer businesses a way to contribute to their workers’ education debt. Since then, more than two dozen companies have signed up and it expects that number to double by the year’s finish.
“This is certainly emerging as a new and very important benefit. “
“This is going to grow rapidly over time,” said Asha Srikantiah, vice president of workplace emerging products at Fidelity. “We’re seeing so many more people who have debt and who are overwhelmed by that debt.”
Indeed, 7 in 10 college graduates have student loan debt. The average person leaves school $30,000 in arrears, while nearly 20 percent owe more than $100,000. Americans are now more burdened by education loans than they are by credit card or auto debt.
Companies offering assistance grows
Helping employees with their education debt is a great way to attract new talent, said John Samaan, senior vice president and head of human resources at Millennium Trust Company.
The financial services firm began offering its employees student loan assistance a few months ago. Now, 20 percent of the company’s 300 employees are already enrolled, Samaan said.
“We got a lot more inquiries from potential candidates,” Samaan said. “People want to join us to be able to participate in this program.”
Options Clearing Corporation, a large clearinghouse for equity derivatives, also started providing its employees student loan contributions this year. More than 70 employees signed up within the first month, said Erin Smith, first vice president of total rewards at the company.
She said student loan assistance is the number one benefit being talked about at job and recruiting fairs.
“Most companies provide a pretty standard benefit menu, like medicine, dental and vision, so when you introduce a program that differentiates you, that really matters,” Smith said.
Will loan assistance become as big as 401(k)s?
There’s still an unfortunate tax hurdle that will likely stall the growth of a student loan assistance benefit, experts say.
Companies receive no particular tax incentive for such contributions while employees must report their payments as income to the IRS.
However, recent bills seek to address this. Rep. Rodney Davis, R-Illinois, introduced the Employer Participation in Student Loan Assistance Act, which would make assistance employees receive from their bosses tax free up to $5,250 a year. Employers, for their part, could deduct “the subsidy.”
Companies including Starbucks and Verizon have expressed support for the measure.
“Congress needs to take the next step and make this benefit tax free,” said Mark Kantrowitz, president of Cerebly, Inc. and a student loan expert. “Most people don’t remember that 401(k) plans started in exactly the same way about 35 to 40 years ago.”
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