If you’re saddled with college debt, you belong to a very large club. In fact, more than 40 million Americans have outstanding college loans. According to an article published on WSJ.com, nearly seven million have gone into default meaning that they haven’t made payments on their student loans for a year. And this year’s graduating class (2015) graduated owing an average of $35,000, making it the most indebted class ever.
If you have, say, $5000 in student debts, congratulations! You should be debt-free in just a couple of years. On the other hand, if you owed that $35,000 at 4.20% interest and make monthly payments of $200 it will take you 213 months or more than 17 years to repay your loans. Just imagine! More than 17 years of $200 a month payments.
Your employer to the rescue!
The job market has become so hot for some companies that they’ve introduced a new perk that could help employees with their student debts. This perk is designed to attract top talent by helping to relieve them of that onerous student debt. You could even graduate debt free from Arizona State University just by working for Starbucks. Of course, not every company offers this kind of help though more and more are jumping on the bandwagon.
It just makes good sense
Offering this kind of perk to a younger workforce just makes sense for employers. According to the study published on PewResearch.org, Generation X has been replaced by Millennials as the workforce’s largest generation. It just makes good sense to offer a perk designed to attract them.
As an example of this the Boston-based companies, CommonBond and Natixis just announced new student loans benefits for their workers. According to Yahoo Finance, a student with an idea recently approached Natixis’ head of retirement practice, Ed Farrington. Most college graduates, he said, are entering the workforce with too much student debt to even think about retirement. Why not do something to help them out?
“This spurred from our desire to try and make it easier for younger people to begin saving and to save more at a younger age,” Farrington said. We just wanted to do what we could today to help folks who can’t save because of student debt solve it.”
Only 3% help with college debt
Unfortunately, this type of help is far from ubiquitous. So far, only about 3% of all companies offer loan repayment programs. “Loan Repayment Assistance Plans” (LRAPs) have been around for a number of years. However, they are typically just for jobs where a lot of expensive education was required such as law, medicine and STEM fields. A few states such as Illinois and Wyoming use LRAPs to attract people to teach in school districts that would be otherwise seen as unattractive.
The plans of four companies
Following is a breakdown of the student loan assistance programs work in four companies: Netixis, CommonBond, PwC and Chegg,
With this company you could earn $10,000 in six years. This is $5000 upfront then $1000 each year until you reach the maximum of $10,000. Employees that have worked for the company for at least five years qualify. The way the benefit is handled is the money is issued like a regular paycheck. The company’s employees can then use the money for any outstanding student loans. Natixis does not follow up to make sure that the money goes towards student loan debts so theoretically it could be used for just about anything.
This company pays qualified employees $100 a month indefinitely. This is a big advantage over other student loan payout programs that typically have caps. So long as the person is employed at CommonBond he or she will receive $100 monthly until their loans have been totally paid off. Anyone who works for the company qualifies for this program but, of course, the benefit money will be taxed.
Chegg partners that stay employed with Chegg get $1000 per year indefinitely. All you need to do to qualify is work for the company full time and have outstanding loan debts. This program is a bit different in that the money is first sent to Tuition.io and then directly to the employee’s student loan servicer. In other words, Chegg employees never see the money. The fine print is, as you might have guessed, the money is treated like taxable income. However it can be used for both federal and private loans.
This company’s program pays $1200 per year up to six years or a total of $7200. However, only about 45% of the company’s 45,000-employee workforce qualifies because they must hold associate or senior associate titles. And, of course, they must be full-time employees. PwC pays via a platform created by a new company called Gradifi. The program is called “Student Loan Paydown.” Companies that use this platform contribute directly toward the employee’s student loan principal monthly. Gradifi then distributes the money to their loan servicers. This program is capped at $7200 and, once again the money is taxable.
If you’re not fortunate enough to work for a company that offers student loan repayment assistance there is still some good news about help with your college debt.
The Department of Education recently announced the eagerly anticipated expansion of the federal income-based repayment program called Pay As you Earn (PAYE) that can make repayment easier for about 5 million people with college debt . It goes into effect this month. This is on top of the 4 million Federal direct loan borrowers enrolled in the current version of this program.
The new version of this program is titled REPAYE with the RE standing for revised. The way it makes more people eligible is by allowing borrowers to sign up regardless of when they got their loans and regardless of their debt-to-income ratios. The PAYE program was opened only to people that had obtained their loans after 2007 and whose debt greatly outweighed their incomes. In comparison, the people who enroll in REPAYE will have their payments capped at 10% of their income regardless of their incomes.