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Why Employers Should Take Student Loan Repayment Benefits Seriously?



Why Employers Should Take Student Loan Repayment Benefits Seriously
Franklin on currency wearing a beret One of the reasons student loan repayments are now the number one and most popular benefit for Millennials and Generation Z employees is the profound impact it has on a borrower’s ability to become debt free. (Photo: Shutterstock)

Workers across the country are saddled with student debt. In total, 47 million Americans collectively have $1.7 trillion in outstanding student loans. The average employee-borrower can expect to spend $5,000 a year paying back their student loans. Such staggering levels of debt often cause significant financial stress for employees and become a roadblock to achieving important financial and personal goals.


Having student loan borrowers half of pension savings of their peers with no student debt at age 30. Student loans are for employees think about it in making decisions about where to work and when to get married, buy a house and start a family. Research shows that financial stress negatively affects employee health and productivity and can lead to absenteeism.

Related: A potential game changer for student debt: the Employer Participation in Repayment Act

Greg Poulin
Gregory Poulin is the co-founder and CEO of good, a leading provider of student loan employee benefits and college savings.

Considering the high impact of student debt, it’s easy to see why employees are increasingly turning to their employers for help repaying their student loans. When early, “What percentage of your benefit payment would you allocate to student loan repayment versus an alternative benefit?” In all cases, respondents between the ages of 18 and 35 chose more money for student loan repayments, over all other benefits, including health insurance, retirement, childcare and PTO.


With the passage of the Consolidated Loans Act of 2021 in December, Congress gave employers a big reason to pay off student debt. The law includes a provision that allows employers to make tax-free contributions of up to $5,250 per year to their employees’ student loans, without the payments being included in the employees’ taxable income. By doing so, Congress made it easier than ever for companies to pay off worker student loans and provide a path to financial freedom for millions of workers struggling with student debt.

The tax exemption was originally included as part of the CARES Act and was set to expire at the end of 2020. Congress granted a five-year extension until the end of 2025 and it is widely expected to be made permanent.

At Goodly, we work with employers to help them offer student loan repayment as an employee benefit. Through our experience with hundreds of employers, we have seen a wide range of employer contributions. Some employers start with smaller contributions of $25 per month, while others maximize the tax-free limit of $5,250 per year by contributing $437.50 per month. For all of Goodly’s customers, the most common employer contribution is $100 per month, making student loan payments a relatively inexpensive benefit to fund. For many employers who use Goodly, they are simply redirecting existing benefit budgets from programs that make little use of student loan benefits.

This is quite easy when you consider that 70% of employers already offer tuition benefits that allow employees to go back to school. These programs often have a participation rate of less than 10% of eligible employees in a given year. Thanks to the new tax exemption, employers can easily redirect this existing benefit budget to the repayment of student loans at no extra cost.

One of the reasons why student loan repayments are now the number one and most popular benefit for Millennials and Generation Z employees is the profound impact it has on a borrower’s ability to become debt free. Using tax-free employer contributions, the average employee-borrower on Goodly is on track to pay off their student loans 31% faster than they would otherwise. The reason for this is that the most common approach to employer-sponsored student loan repayment is for employees to continue paying their regular student loan payments. Employer payments are not only tax-free, but are applied directly to the principal of the student loan in addition to the employee’s payment.

Employer-sponsored student loan repayments were well on their way to becoming a standard benefit, with about 1 in 10 employers offering it before the tax exemption was introduced. That figure is expected to see a 300% increase in 2021 to one in three employers now the distribution is tax-free, according to the Society of Human Resources Management.


The growth in student loan fees is largely due to employee demand. Each year, 70% of all college graduates, representing 3 million Americans, enter the workforce with an average student loan balance of $40,000. As a result, the US is expected to add more than $1 trillion dollars in new student loans by 2028. The mounting debt of student loans is forcing many employers to rethink their current benefits to meet the changing needs and demographics of the workforce. By 2025, millennials will make up 75% of the workforce, employers must understand the extreme impact of student debt on employees and be prepared to meet the needs of millennials and Gen Z workers if they expect to attract and retain top talent.

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