How does repaying a student loan work
Similar to how an employer-sponsored pension plan such as a 401 (k) account works, your employer would work with a third party. This third party would allow your employer to make monthly contributions to your service provider. During this time, you will continue to make your own payments to pay your student debt. What is particularly interesting is that your employer’s contribution would go to the principal, which could potentially reduce the repayment of your student loan by a few years.
The structure and amount of assistance that can be provided will depend on the employer. Your workplace can offer a one-time lump sum payment. For example, helps employers establish a contribution plan and then synchronizes with payroll service providers to make additional student loan payments on behalf of employees. These contributions are made with after-tax dollars, and the employer can pay between $ 25 and $ 200 a month to settle the balance of the debt.
So how much savings could you save with student loan repayment assistance? Suppose you have $ 30,000 in student loans and your interest rate is 4.79%. Your monthly payment is $ 315. If your employer pays $ 100 more per month, instead of 120 months, it will take you 85 months to pay off your debt, which is almost 3 years. In addition, you will increase your interest from $ 7,800 to $ 5,275, which will save you $ 2,525 in interest charges. Of course, it all depends on the length of your stay in your company and the number of months it contributes to the repayment of your student debt.
Make a solid case for that
Consider taking the lead at work and asking for student loan repayment assistance to be added to your benefit package. Talk to your human resources department at your workplace and argue it. You can talk about it during a session on employee benefits or during your annual review.
Highlighting some relevant statistics may help support your argument: A group of 500 participants revealed that 85% of workers would join a business for five years if their employer helped them repay their student loan. Moreover, nearly 65% of those surveyed say they could get a second job to pay off their student loan. In summary: Offering a student loan repayment can be beneficial for you and your employer.
Legislative changes are under way
Some changes at the legislative level could further encourage businesses to take the student loan repayment route. It would extend a 10% tax credit for employers offering student loan repayment assistance. That would be 10% of what an employer pays on behalf of his employee, up to $ 500 a month.
Another outstanding incentive bill is the. Introduced in February 2019, this bill, if enacted, would allow employers to provide up to $ 5,250 per year in non-taxable student loan assistance, the same amount as the reimbursement of fees. exempt from tax.
There are programs not sponsored by the employer
What happens if your employer is unable or unwilling to implement a loan assistance program? Or are you a freelancer without full-time benefits? In addition to employee-sponsored student loan repayment assistance programs, there are other ways to get help paying down your student debt. For example, some places in the United States offer to work and live in their city.
And if you are in the market to buy a home, a handful of state-sponsored home buying programs could help you reduce your student loan debt. For example, through Maryland, you could get help to settle the burden of your debt when you buy a house there.
Even if you can not ignore the fact that your student loan debt is a reality, increasing student debt repayment programs offered by employers will help ease this huge burden. If employees advocate for these programs at work and legislators enact legislation that encourages employers to implement them, the resources available to borrowers will hopefully continue to grow.