The list of companies deciding to help employees with their student loan debt is growing. Aetna recently announced that next year it'll match eligible employees' student loan payments up to $2,000 per year, with a maximum benefit of $10,000.
Only 4 percent of companies offer a student loan repayment assistance benefit, according to the latest annual survey by the Society of Human Resource Management. But Lenny Sanicola, a benefits expert at WorldatWork, a nonprofit association of 70,000 mostly Fortune 500 human resource professionals, says that the perk is catching on.
Given that the average amount of student debt is about $37,000, $10,000 is a significant benefit. That, matched with the grad's payments, can help retire more than half the average debt balance over five years.
Student debt can also cause harm 50 years down the road. Millennials who start their careers with $30,000 in student loan debt can end up with $325,000 less in retirement savings than if they had no education debt, according to one study by LIMRA, an association of more than 850 financial services companies.
How Good is the Benefit?
Here are six essential questions to ask to size up the offers.
Who's eligible? Employers use this benefit to attract and retain workers who have the skills they need, says Chris Duchesne, a vice president at EdAssist, the benefits administrator behind the plans offered by Aetna and a dozen other companies. Your chances are best if you're a job prospect only a few years out of college, and you're in a high-demand field, such as engineering, IT, cybersecurity, actuarial sciences in the insurance industry, and nursing.
How much of a benefit is possible? The amounts vary. PwC, formerly PricewaterhouseCoopers, the professional services firm, will pay $1,200 per year for six years, or a maximum of $7,200. Similar to Aetna's plan, Fidelity, the investment giant, pays $2,000 a year up to a total of $10,000.
Some companies, such as NVIDIA, the Silicon Valley visual graphics company, pay as much as $6,000 a year up to $30,000. Some federal agencies can pay up to $10,000 per year of government employees' student debt, up to a total of $60,000.
Is there extra value? Yes. "There are no prepayment penalties on student loans, so the employer's matching payment can help you pay off your loan quicker," says Mark Kantrowitz, publisher of Cappex.com, a free service that connects students with colleges and financial aid.
How is the money paid out? Typically, employees get an annual benefit paid directly to their student loan servicer. In general, eligible employees can start collecting after they've been with the company for six months to a year.
When Natixis Global Asset Management first offered its plan last year, it was designed to pay a $5,000 lump sum only after the employee's fifth year with the company, then $1,000 a year for a total of $10,000. Natixis in July changed that to $1,000 per year, starting the employee's first year with the company, up to a total of $10,000.
How does the benefit compare to competing offers? Since this benefit is taxed as regular income, prospective beneficiaries must carefully compare differing packages from competing employers.
Say Company A offers a salary of $40,000 per year plus $2,000 in annual loan repayment assistance for five years. That's $42,000 total annual income. If Company B doesn't offer any student loan debt help, but pays a salary of $42,000, that's a better deal for two reasons: It's a higher income of course, and the extra $2,000 does not go away after five years.
An even better deal is a signing bonus to pay down your student debt, says Kantrowitz. You may be able to command this kind of up-front payday if you're in a high-demand field.
"I know one nursing school graduate who negotiated a signing bonus of $45,000 to pay off her student loan, because she had good credentials, and there's a nursing shortage," says Kantrowitz.
Yet another student loan repayment option: Lawmakers, colleges, and government employers have created potentially valuable loan relief programs for graduates who seek public service employment and often forgo a high-paying career.
What are the restrictions? Be aware of the repayment clause. Depending on the employer and the terms of the program, if you leave before a specified period of time has passed, you may find yourself having to repay all or a portion of the money you received.
Usually, federal and private student loans are eligible, but not parent loans, says Duchesne, and you must be current on your loan.
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