The Case for Student Loan Benefits Is Much Stronger Than the Case Against

The Case for Student Loan Benefits Is Much Stronger Than the Case Against

In a recent post at the Atlantic, Amy Merrick cast a skeptic’s eye on the growing trend of student loan assistance benefits among US employers, arguing that these benefits may not be as helpful to employees as they seem. “For one thing,” Merrick notes, “the student-loan industry is notoriously opaque and difficult to deal with”:

By the time college students graduate, they may have accumulated loans from a number of different places. In contrast with credit-card companies, which typically provide in monthly statements what’s called a minimum-payment warning,student-loan servicers don’t have to tell borrowers how long it will take to repay their loans if they contribute only the minimum every month. … Last year, the [US Consumer Financial Protection Bureau] reported complaints from borrowers that student-loan servicers inexplicably returned payments from employers, applied funds to the wrong account, or made other servicing errors that took months or even years to resolve. In some cases, the benefit affected people’s eligibility for loan-forgiveness programs.

She also points out that student loan assistance is not tax-advantaged in the same way a 401(k) plan or a health savings account is. These payments are treated as regular wages for tax purposes, so employees have to pay income tax on them even as they go directly toward paying off their student debt. A bill that would introduce more favorable tax treatment for student loan benefits was introduced in the House of Representatives in February 2017 but has been stalled in the House Ways and Means Committee ever since and was not addressed in the tax reform package Congress passed last December.

Merrick leverages these points to question whether student debt benefits are really any more valuable to employees than a raise. There are obviously issues to be worked out in the implementation of these relatively new benefits, and of course Congressional action to improve their tax treatment would make them more valuable, but to dismiss them outright at this early stage is premature. For all the media attention they get, student loan benefits remain comparably rare: According to our forthcoming analysis of education benefits at CEB, now Gartner, just 7 percent of organizations offer them. Akhil Nigam, the head of emerging products for Fidelity’s workplace-investing division, tells Merrick that up to 90 percent of the employee student loan payments they process have no issues: Not a perfect track record, but hardly sufficient cause to throw out the baby with the bathwater.

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Employees Value Student Debt Benefits More Than Employers May Realize

Employees Value Student Debt Benefits More Than Employers May Realize

CommonBond, a financial technology company specializing in student loan refinancing and consolidation, recently surveyed 1,500 employees and 500 HR executives across the US to see how student loan debt assistance fits into employers’ financial wellbeing strategies and how well these programs were really meeting the needs of employees. The results of the survey indicate that student debt has a significant impact on the entire American workforce—not just millennials—and that organizations could make a big difference to their employees’ financial health by focusing financial wellness benefits on this form of debt.

Needless to say, CommonBond has a business interest in reaching that conclusion, but its findings happen to dovetail with what we already know from previous studies and our ongoing research at CEB, now Gartner, on global trends in education benefits.

Perhaps the most important of CommonBond’s findings is that 78 percent of employees who currently have or expect to accrue student loan debt want their employer to offer a student debt repayment benefit, including 65 percent of employees in this category over the age of 55. Among employees with student debt, repayment assistance is the most commonly requested financial wellness benefit, CommonBond found, yet HR leaders rank it as their third priority.

In our most recent survey of over 6,000 employees across the globe, we also found that employees value these benefits highly: 61 percent of employees see education benefits as an important factor in making a decision about a job offer. Of the organizations that offer education benefits, 90 percent provide tuition assistance—which has proven hugely successful at organizations from Cigna to Chipotle—but only 7 percent provide student loan reimbursement.

(CEB Total Rewards Leadership Council members should stay tuned, as more insights on education benefits from our annual benefits communication survey will be released next month.)

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