As Americans prepare to resume their monthly student loan payments and grapple with the Supreme Court’s decision against loan forgiveness, certain groups are exploring the potential for workplace solutions to aid borrowers. The Society for Human Resource Management (SHRM), representing HR professionals, has called on Congress and state legislatures to pass policies that benefit both employees and employers. They are seeking enhanced tax breaks for workplace education benefits and the continuation of tax policies that are set to expire soon. Advocates argue that these changes would help level the playing field between education benefits and other established benefits such as retirement and healthcare, which already receive tax breaks.
SHRM also urges businesses to support their workers as they navigate student debt challenges, given that debt payments are about to resume in October after being suspended for over three years. According to a survey by the Employee Benefit Research Institute, only 17% of employers currently offer some form of student loan assistance, but another 31% plan to do so in the near future. While the most common assistance programs don’t directly alleviate student loan payments, they include contributions to borrowers’ 401(k) accounts and providing access to 401(k) loans. Retirement savings benefits seem to be the common thread in these programs, as employers increasingly extend their reach to address various financial needs beyond retirement planning.
A Lending Tree survey revealed that many workers, particularly younger ones, prefer student loan payment assistance over traditional benefits like a 401(k) match. To address the student loan crisis, Derrick Johnson, president and CEO of the NAACP, suggests including student loan-related incentives in employee compensation packages. However, Johnson believes that direct financial assistance from lawmakers to borrowers is the most ideal solution, instead of relying on workplace tax breaks.
One valuable workplace benefit introduced by the CARES Act pandemic relief law is an expanded tax break for educational assistance, which now includes student loan repayments. Employers can currently contribute up to $5,250 annually towards an employee’s student loans, and these payments are tax-free. However, this tax break is temporary and due to expire in 2026 unless Congress takes action. SHRM is calling for the tax break to be made permanent, alongside higher annual limits on tax-free payments. The American Federation of Teachers also hopes for an extension of this tax break.
Starting in 2024, employers will also be allowed to match 401(k) contributions for borrowers making student loan payments, a provision introduced by the Secure 2.0 law. Although only a small percentage of employers currently plan to implement this policy, it may become more widespread as companies seek to attract top talent in a competitive labor market. However, experts caution that these programs may appeal more to certain employers and workers, creating divisions and potential resentment among those who do not have student loans.
In conclusion, as the burden of student debt weighs on many Americans, organizations like SHRM and the NAACP are advocating for workplace solutions to provide support to borrowers. While these programs can alleviate financial stress and improve employee retention, there are challenges in ensuring equity and avoiding division among the workforce. The extension of tax breaks and the inclusion of student loan incentives in employee compensation packages are among the proposed strategies. Ultimately, addressing the student loan crisis will require a comprehensive approach that combines both workplace and legislative measures.
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