There are numerous reasons people accept jobs, but many millennials want to find employers who will help them pay off their student debt. Many companies are obliging them by initiating student debt repayment programs. Graduating with $60,000, $80,000 or even $100,000 in debt is not unusual, considering the cost of education these days.
Harvir Humpal, 24, recently graduated with a master's degree in engineering and $60,000 in student debt. This student loan debt was on the top of his mind when he began interviewing with potential employers, and he found one willing to help him out. Humpal took a position at Abbott, a healthcare company that specializes in diagnostics, medical devices, and nutrition. Last June, Abbot began offering a so-called Freedom 2 Save program, which lets employees pay down student debt while also putting money aside for college.
Humpal said the program was one of the main reasons he took his current job. Apparently, many other millennials feel the same way. About 90% of recent graduates who have student loans are actively seeking employers who will help them pay down their debt, according to an Abbott survey of about 2,600 people. Additionally, 62% of working American would consider changing jobs to work for a company that offered this benefit.
Evaluating a Student Loan Payoff Program
This assistance scores a home run with younger workers because so many of them are paying off large student loans. However, it's important to structure the fine print when creating these programs. They might not be suitable for all graduates. After all, these programs are fairly recent offerings, and only time will tell how they measure up to expectations. Some programs may match student payments while others simply deduct money and pay off loans as part of their benefits program.
How are the programs structured?
How a company sets up a student loan repayment benefit plays a large role in how good the program is for employees. Various employers appear to be offering many different versions. According to the Society for Human Resource Management, approximately 4% of companies offer this program to employees,
Different Types of Programs
Some programs, such as the one offered to candidates by Abbot, feature a company match for the 401(k) program when the employee pays down their student loan. As part of Abbot's innovative program, the company pays out 5% of an employee’s salary to a 401(k) plan--provided the employee can show they’re putting 2% of their pay toward paying off a student loan.
Some companies offer an even more popular version. In this scenario, the employer matches the amount the employee contributes and directly applies it toward student loans.
Some employers have copied Abbott's structure, but many may choose a different route since it's pretty complicated. It’s easier to pay the lender than to add the contribution to a 401(k), according to Mark Kantrowitz, a student debt expert. This makes it easier for the company to make the payment. However, when an employer pays off part of student debt, the money becomes taxable income. That means employees have to pay taxes on these contributions every year--so it's no longer 100% free money.
How much money are you giving to pay off student loans?
Many employers place caps on these programs on a yearly and total basis. For example, Aetna matches up to $2,000 toward student loan payments every year if you are a full-time employee. They also limit the total payout to $10,000. Part-time employees can get up to $1,000 a year or a maximum lifetime benefit of $5,000. That means that employees can only use each program for a maximum of five years. However, many loans are set up with a 10-year term.
The education company Chegg doesn't put caps on its total loan repayment benefit, though yearly contributions are capped.
What are the restrictions?
Some employers put conditions in fine print that affect the employee's benefits. One of these is that they may require the employee to stay with the company for a certain amount of time prior to being eligible. Other employees may offer it only to full-time staff in certain positions.
For example, Nvidia offers employees $500 a month toward student loans. It's available to employees that graduated within three years and who work a minimum of 20 hours a week. The lifetime limit is $30,000. However, co-ops, interns, and temporary employees cannot take advantage of this generous program. Eligible employees have to work for Nvidia for three months before they can receive the benefit.
It's worthwhile to do your homework to find out if your company can help pay off student debt faster. This should be part of a comprehensive review of benefits offered to candidates.
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