Friday, November 15, 2019

More employers offer workers help paying off student loans

By Sarah Skidmore Sell, AP Personal Finance Writer.

It is not clear if this is a taxable benefit. If so, then it just means that a worker gets paid less when its company pays part of their student loan. If, as the proposed legislation shoots for, it is not a taxable benefit, then the taxpayers end up subsidizing part of these loans. At lower salaries, the workers pay less in taxes (yet their total compensation is higher because the employer pays part of the loan-it is like getting income with no income tax).

"Americans collectively owe nearly $1.5 trillion in student loans — more than twice the total a decade ago. It's a burden that weighs on millions of adults, shaping their life choices and often stunting their financial growth.

Now a small but growing number of employers are stepping in to help. About 8% of employers offer student loan repayment assistance in 2019, according to the Society for Human Resource Management. That's up from 4% in 2018 and 3% in 2015."

"In 2016-2017, almost 60% of people who graduated with a bachelor's degree took on debt and the average amount among that group was $28,500, according to The College Board. For some who seek advanced degrees, the borrowing can grow to $100,000 or more."

"Employers format repayment assistance in a variety of ways. Some offer a match of employee payments while others offer a flat contribution amount, both up to a threshold."

"Several companies say their programs have proven an effective recruitment and retention tool, particularly in this tight labor market."

"It's a puzzle why more private employers have not offered such benefits, said ZipRecruiter's Pollak, despite demand from employees. The companies are not paying off the full loan and, for a minor cost they are greatly boosting employee morale.

"It's an easy win," said Stephen Kapusta, vice president of channel strategy at ADP, a human resource services company.

Part of the problem is that money given to employees to help pay off student loans can be considered income and be taxed. So, there is little financial incentive from a tax perspective for the employee or employer.

As such, employers have had to find more creative work arounds — such as paying the provider directly, as Fidelity does, or trying a more unique retirement payment solution."

"In early 2019, a bipartisan bill was introduced that, if passed, would allow employers to contribute up to $5,250 tax-free every year toward student debt repayment. Others are looking to the IRS for broader guidance on ways to contribute to student debt repayment in conjunction with their workplace retirement plan."

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