The Lowdown on Employer-Paid Student Loans

If you’re a recent – or perhaps not-so-recent – college grad, you don’t need to turn on the news to understand the student loan debt crisis. Odds are pretty good that the $1.2 trillion in student loan debt afflicting young Americans isn’t just an abstract figure for you – it’s your life. Leaving school with tens of thousands of dollars in student loans  may be keeping you from living the life you’ve always dreamed of, as buying a house or car is more difficult if you already owe a good portion of your paycheck to someone else.

There are lots of ways to pay down your student loan debts faster, and they don’t all require Spartan living styles and a steady diet of ramen noodles to do it. One of the most often overlooked methods of killing your student loan debt is to get your boss to pay it for you.

That’s right: There are employers out there who will pay some or all of your student loan debt as a benefit.

Types of Student Loan Payment Benefits

Employers have various ways of helping their workers with educational expenses, and it’s always a good idea to ask directly about these benefits in the prehiring process so you can weigh your options carefully and accurately. Here are some benefits buzzwords to be on the lookout for when interviewing with private companies:

• Direct Repayment Assistance: A small but growing number of companies are offering student loan repayment as a direct benefit for employees to attract the best and the brightest.
• Tuition Reimbursement: If your employer doesn’t kick in toward your student debt directly, many make continuing education affordable by paying for new coursework. This at least keeps you from racking up even more student debt in the future.
• Automatic Savings Plans: Some companies automatically enroll you in a 401(k), and some provide matching funds if you contribute voluntarily. These funds can allow you to save for retirement while freeing up your own money to pay down your student loans, so take them into account as an indirect form of assistance.
• Financial Planning Services: Many large companies offer their employees access to professional financial planners, and they can offer great advice about consolidating your student loan debt and coming up with a solid repayment and savings plan while you’re young. Take advantage.

There are also many public employers that forgive all or part of certain student loan debt for employees. There are restrictions here, so it pays to do your research. For example, the loans forgiven are typically those from the government, such as Stafford or Perkins loans, and they may not be eligible if you’ve consolidated them with private loans.

Still, if you are interested in a service job that meets the needs of underserved areas, you could be eligible for a major loan repayment benefit. In general, these types of jobs may be eligible:

• Teachers
• Lawyers
• Military service members
• Automotive workers
• Veterinarians
• Nurses
• Doctors
• Other health care professionals

It’s also possible for employees of the federal government to have their student loan debt forgiven. Since 2008, the federal government has paid over $452.8 million in student loan repayments as part of a program that helps recruit and retain federal employees. The range and location of government jobs is vast, so it can pay off to be on the lookout for these opportunities as they open.

Important Questions to Ask Before Accepting Benefits

Though jumping at the chance to have your boss pay off your student loans seems like a no-brainer, it’s important to double-check the implications of any loan repayment program, particularly as it affects your bottom line at tax time. Make sure you ask the following questions – and that you understand what the answer mean for you:

• What’s the difference between loan forgiveness and loan assistance? The federal government offers loan forgiveness or cancelation programs because they have the power to basically erase your federal student loans. Loan assistance is when you are still being charged to pay the principal and interest, but your employer pays these for you.
• Will I need to pay taxes on the money? In general, if your employer pays part of your loan, that money counts as compensation and will be reported on your tax forms. You will have to pay taxes on that compensation. Loans that have been forgiven aren’t taxable in any way.
• How do the rest of the benefits add up? Student loan forgiveness or assistance is often offered in place of take-home compensation or as a way to entice employees into a job that many people may not want to do. For example, it could be used to attract people to a rural location or into difficult work with underserved populations. Make sure the rest of your paycheck is enough to support you before trading compensation for student loan forgiveness.

Other Ways to Pay Off Your Student Loans

Whether or not you end up accepting a job with specific student loan benefits, you can always tweak your lifestyle to help you pay down your loans more quickly. Don’t forget these important steps to get your financial house in order:

• Try Biweekly Payments: Paying every two weeks instead of every month will help you get ahead of your interest accrual and will result in extra payments each year, which allows you to pay your loans off faster.
• Take Advantage at Tax Time: You can claim a deduction for student loan interest, which will reduce your tax burden. Instead of blowing that bigger refund on a vacation, send it directly to your lender to get a jump on your payments.
• Commit to Paying Extra Each Month: Even just $20 or $50 extra per payment will help pay off your loan faster, and for less money in the long run. Try a loan calculator to see how it works.

Your student loans may feel overwhelming, but with help from your employer and good financial planning, you can get it under control and feel in charge of your personal finances.