Student Loan Repayment the Next ‘New’ Benefit

mercerpeopleproblog-Student Loan Repayment the Next New Benefit

Student Loan Repayment — The Next ‘New’ Benefit on the Employment Frontier?

Written by Mercer PeoplePro Engagement & Communications Specialist, Lisa Jarmoszka


There are about 43 billion student loan borrowers out there – many of whom carry significant debt from pursuing advanced degrees. According to 2016 studies by the Society of Human Resource Management (SHRM) and Willis Towers Watson, approximately 4% of employers offer some kind of assistance for student loan repayment programs. This number is expected to increase to 20% by 2018.

While the student loan repayment benefit has been around for years – but most popular with federal agencies and public interest employers – the increase in the number of student loan borrowers (from 179,292 in 2005 to 869,988 in 2015) and average balance ($12,494 in 2006 to $24,920 in 2015), combined with proposed federal and state legislation, is making many employers take notice.

In fact, employer-backed student loan repayment programs could be a powerful recruitment and retention tool – for millennials and their colleagues carrying student loan debt. Additionally, 23% of employees aged 18-24 ranked this type of benefit as ‘very important’ in a 2016 survey by Student Loan Hero. A little more than half of all respondents said they’d prefer student loan repayment assistance over additional vacation or paid time off, and 45.8% said they’d prefer assistance over a 401(k) employer match.

It’s important to know that, currently; employer-funded student loan assistance is considered income and taxable to employees. At the federal level, the proposed Student Loan Repayment Act would create a 401(k)-like program, with an employer contribution of up to $6,000 per year or a $50,000 lifetime cap – all of which would be tax-free.

At the state level, Massachusetts is considering legislation for the same type of program, with a maximum annual employer contribution of $3,600. The cost of implementing these programs have (so far) prevented them from being signed into law, but that could change with the new presidential administration.

Interested in implementing this type of benefit in your organization? Here are some important considerations:

Reimbursement Amount and Frequency of Payments
The amounts – annual or otherwise – that employers reimburse varies widely. Some reimburse a percentage of what the employee pays toward the loan balance each year, while others provide an annual lump sum based upon service requirements. Still others reimburse on an incremental basis over a pre-determined time period.


Eligibility for student loan repayment assistance benefits also varies, depending upon what the employer wants to reward/incent. Most companies require a minimum of three to six months of service. Some, like Staples, currently offer the benefit to high-potential and high-performing employees (but plan to extend it to all employees, over time.)

Annual or ‘Lifetime’ Caps on Benefit Amount

Most employers offering the benefit cap the reimbursement amount annually or over the employees’ tenure. For example, Fidelity Investments offers employees a maximum of $10,000 in federal student loan assistance.

Repayment Provisions Upon Termination

Some organizations – particularly those who provide a 401(k)-like match of an employee’s student loan payment – use the benefit as a retention tool, requiring a partial repayment of the benefit received if an employee leaves before fulfilling an established service requirement. Many, however, do not require repayment.

HR Expertise On Demand

Smart organizations first articulate the goals for establishing this – or any – type of benefit program. If you’d like some assistance establishing recruiting and retention priorities or help developing an employer assistance plan for student loan repayment, Mercer PeoplePro is standing by to help. Our HR experts will even give you a two-hour consultation FREE. To set up your free consultation, visit us today — help is only a click away.

Leave a Comment