How to start a student loan repayment benefit

Getting the right person for the job can be difficult, but getting them to stay with your company can be even more challenging.

What if you had a program that helped employees pay off their student loans? And what if this program was easy to set up and simple to manage? As well as aid in your recruitment efforts?

With Paidly, offer your employees a student loan repayment as a benefit. Paidly handles the verification process, so your employees sign up with an email invite. Then you set an amount and how often you would like their student loans to receive payments.

Employee student loan assistance services

Easily offer student loan repayment benefits. Download our free guide or visit our employer benefit page to learn how to relieve employee financial stress.

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Where to start

Assess if you feel you are losing out on top talent because of your benefits. For example, only 6.38% of federal loan debt belongs to adults under 25. However, consider that a significant portion of the workforce falls into older age brackets: individuals over 25, who may also be seeking strong benefits packages.

Adults ages:

• 25 to 34 year olds hold 30.4% of the federal student loan debt.
• 35 to 49 year olds hold 38.7%
• 50 years and older, 24.5%

per the education data initiative https://educationdata.org/student-loan-debt-by-age

Do you want to help your employees gain financial freedom while taking advantage of a tax benefit?

How do student loan repayment benefits work?

A student loan repayment benefit is a newer benefit offered to employees. The employer makes supplemental payments to their employee loans. These can be a lump sum or a monthly recurring payment such as $25 or $100. You can offer different amounts per employee, redirect bonuses or buy back PTO for a lump sum payment.

What information do I need to get started?

Are you planning to take advantage of the tax-free benefit? First, you'll want to set up a section 127 plan that allows you to offer up to $5250 a year tax-free. Paidly can provide a sample 127 plan to get you started.

It's important to note that the $5250 tax-free limit is for all qualifying education assistance programs combined, not just repayment.

• What employees are you inviting to your benefit? Remember that nondiscrimination rules for other benefit programs do not apply to student loan repayment programs.

• Determine how much you want to contribute: is it monthly, a lump sum such as a bonus, and is it different per each employee? You can contribute with Paidly as little as $25 a month. The most common is $100/month.

• An announcement email: get your workforce excited! Paidly can provide sample emails to aid in this announcement.

• Collect the employee's emails you plan to invite or send to everyone in the company. Paidly's verification team will review each employee's loan information for you.

Do I need to ask for my employee's loan information?

No! Paidly will handle all verification steps with your employees, whether their loans are eligible and where we need to make payments. Nothing about the current balance or monthly payment amounts is shared with you, the employer.

Paidly will only show the loan provider information to you for tax purposes, preventing you from worrying about personal data and causing an HR nightmare.

How does Paidly work for me?

• Paidly's verification teams handle the entire loan eligibility process; Paidly will never share your employee's personal loan debt information with your organization.

• Reports that you can pull on-demand for specific months as well as a yearly report.

• You will get a complete dashboard allowing you to manage and enroll your current and future employees into benefit plans you create running on your schedule, including Paidly's current products of recurring payment plans and on-demand or one-off payments.

• Paidly will provide each of your employees a dashboard to track their increased reduction in debt with the help of you, their employer. In addition, their dashboard will allow them to select which loan provider will receive the extra payment enabling them to choose which loan debt they want to tackle first.

• On-demand allows you to play catchup on employee student loans or offer Yearly, Sign-on, and Referral Bonuses. You can even convert Paid Time Off (PTO) into a tax-free lump sum payment to their student loans.

• Providing a lump sum payment directly to an employee can hit the principal and drastically reduce the life of their loans, Saving the employee thousands on their loan and reducing years in the loan cost.

Check out our lump sum extra payment calculator to understand how much you can help your employees.

Why should I offer this benefit and pay my employee's student loans?

Many employees are reluctant to ask for help with their finances; many do not want anyone to see that they are in debt. Paidly allows you to offer assistance without drawing attention to any of your employees. Paidly handles the employee-to-loan debt relationship through our verification teams.

According to Education.org, approximately 15% of all Americans have outstanding student loans they use to finance their undergraduate education. Additionally, 50% of student loan borrowers owe more than $19,281 in debt.

Your employees may also have a

• Monthly mortgage payment of $1,427 (in 2021 from the U.S. Census Bureau's American Housing Survey).
• An auto loan payment of $700 for a new car and $525 for a used car.
• Also, having an average student loan monthly payment of $393.
• Adding all that and not even including insurance.

Some of your employees are even forgoing investing in your organization's retirement plan because of their financial stress.

Employees currently relaxed about paying off their student loans are also more likely to be productive. But, unfortunately, one-third of employees are distracted by finances at work per a 2022 PwC employee financial wellness survey.

Under an employer supplemental student loan repayment benefit, you and your employees can take advantage of the CARES Act, allowing up to $5250 in student loan payments from an employer to be tax-free.

With all these incentives, there is also a return on investment (ROI) by reducing the turnover rate within your organization. For example, using Paidly's ROI calculator and offering just a $100 contribution through Paidly while having a 15% turnover, you could see an ROI of more than 136%!

Measure your ROI and improve employee retention

Create an informed employee retention strategy, see an estimate of your return on investmet when offering a Paidly student loan repayment benefit.

See your return

Ready to get started?

Let's be honest. Most employers already have health insurance and retirement savings plans. Paidly offers a great benefit that none of your competitors are offering. And it's not just the employees who win – you get better talent.

Still have questions? We have answers! Visit our Employer benefit page or send us an email at [email protected].