For a long time, it felt like there was no end in sight with the student loan debt crisis. The crippling $1.3 trillion in education that did not meet the financial expectations of a good paying job is a recurring migraine for many Americans. Student loan debt as high as $130,000 is no longer unheard of.
But there could be some relief on the horizon for this crippling debt.
Many students halt their 401k payments to pay off debt, which is an unconventional but popular idea if you follow personal financial plans like Dave Ramsey’s 7 Baby Steps model. But what if these students had the chance to put that matching company pay towards their student loans? It’s a very real reality for several current and former students. In fact, The Wall Street Journal stated that nearly half of all respondents from an Iontuition survey stated they rather have money for student loan repayments than a 401k.
There’s a growing list of companies that pay off student loans for employees. Chegg, Fidelity, Natixis, and even the infamous Nevada brothel, Moonlite Bunny Ranch, will help employees with student loan debt. Moonlite will match employees’ loans at 100% for 2 months at the amount they make as sex workers. One “bunny” paid off her $40,000 loan within 2 months of working on the ranch.
But there are clear downsides to the growing list of companies offering assistance to remove student loan debt. The most obvious fact is less than 5% of U.S. employers offer this benefit. With more baby boomers retiring and more millennials making up for most of the U.S. workforce, workplace student repayment plans will be a growing concern. Secondly, it could turn into a financial strain for companies, especially smaller startup companies trying to compensate for student loan payments as well as 401k match ups for employees who don’t need student loan assistance. Third, the extra money the employees would be receiving for student loan debt, unlike 401k payments, would be considered income. In other words, people taking advantage of the perk would be taxed for it. So, one would have to be a very financially sound individual to see if the student loan benefit is really that great of a deal.
But there are positive components to this. The fact that someone is willing to offer assistance with student loans would be enough of a psychological boost for many to jump on the opportunity. Additionally, many millennials may already be holding off on buying a home, starting a family, or getting married so even if there were tax obligations to the perk, it wouldn’t have that much of an effect on them. Designing a company’s perks towards the needs of many of the employees’ needs could make for a more content, productive working environment. Companies wouldn’t be too worried about turnover rates and employees would be happy to collect a check, pay off their student loans, and rest a little easier at night.
But the real test comes on Capitol Hill. There are many legislative measures in tact to assist students with their student loan payments. Looking at the official Federal Student Loan website, students have a variety of choices to pick from including the Pay-As-You-Earn plan, Income-Based Repayment plan, and the Income-Contingent Repayment plan. (If you have private loans, it would greatly depend on the options available from the lender.)
A current measure would allow companies to put up to $5,500 per year for an employee’s student loan debt. This Democratic measure is surprisingly getting bipartisan support, more so than other plans such as the popular idea of allowing students to refinance their loans, including those with fixed interest rates.
While this is a noble and very popular measure, it won’t please everyone. However, it’s commendable to see companies and Congress making measures to bring some relief to the student loan crisis once and for all.