HR experts say student loan reimbursement can help recruit and retain talent

Student-loan borrowers were saved by the proverbial bell last month when President Biden channeled his inner A.C. Slater and announced some relief for those with student-loan debt.

Borrowers earning less than $125,000 a year or $250,000 per household will be eligible to receive $10,000 in student-loan forgiveness, while Pell Grant recipients who meet the same income requirements will receive $20,000. The administration also extended the pandemic-era student-loan repayment pause until December 31, 2022.

While, according to the White House, the program is expected to wipe out debt for 20 million Americans, it likely won’t negate the need for student-loan assistance benefits like those offered by employers including Google, the Estée Lauder Companies, and PwC. Experts told HR Brew that such benefits will continue to be in high demand for the estimated 27 million former students who will still carry some or all of their debt and for the next generation of borrowers—and offering them could give companies a competitive edge.

Report card. When average student-loan debt hovers around $29,000 (and over $44,000 for those over 45) according to Credit Karma, HR shouldn’t underestimate the draw of financial-wellness benefits. College debt is one of the biggest barriers to financial wellness and ability to save for retirement, according to a 2021 Betterment survey of US workers. What's more, 24% of respondents said student-loan assistance would “entice” them to leave their current job.

Kristen Carlisle, general manager at Betterment at Work, which offers student loan management resources, told CNETthis month that student loan benefits are becoming more common at companies of all sizes as HR recognizes employees’ struggles with student loans. “Employees are asking for it,” she said. “Bottom-up demand is shaping the narrative.”

Carol Mendoza, VP of benefits at financial services firm Voya Financial, said she uses student loan reimbursement to help retain employees. “If you have an employer who is offering this [student loan] benefit, and over a five year period, you can have over $25,000 of student loan debt repaid…I think that’s a huge incentive to stay with your employer,” she told HR Brew.

HR teams that want to offer student loan assistance aren’t on their own. As part of an extension to the CARES Act, the federal government allows employers to pay up to $5,250 of student loan debt per year until 2025. The best part: Robert Farrington, founder of financial literacy company the College Investor, told HR Brew these reimbursements “are tax-free to both the employee and employer, so it’s a nice way that you can provide some extra compensation.”

Next semester. While Mendoza and Farrington both said the Biden administration’s move to address student debt will help current borrowers, they believe employer-assisted student loan repayment will remain a hot benefit among job seekers and employees.

“The problem is that it does nothing to address the next generation [of borrowers],” Farrington explained. By making student loan benefits part of their overall compensation strategy, he said, HR pros have an opportunity to assist future generations of workers—and attract key talent.

Mendoza agreed, adding that she hopes more employers will step up to help employees going forward. “Ten [thousand] is a small piece of what many are facing and the fact that the Biden administration has shined the light on this issue may encourage other employers to pick it up.”—KP

Do you work in HR or have information about your HR department we should know? Email [email protected] or DM @Kris10Parisi on Twitter. For completely confidential conversations, ask Kristen for her number on Signal.