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Attracting and Retaining Talent with Student Loan Repayment Benefits

Quick look: While 44 million people in the U.S. carry student loan debt, only 7% of employers offer student loan repayment benefits. This gap lends an opportunity to small businesses to provide these perks and contribute to their employees’ financial security—a process that’s made easier by partnering with a professional employer organization (PEO).

By 2030, it’s estimated that nearly 75% of the workforce will be made up of Millennials and Generation Z. For employers, creating a workplace that’s attractive to these groups will be crucial to attracting and retaining top talent.

In addition to valuing flexibility, diversity, technology, growth opportunities, and corporate social responsibility, these workers also seek employee benefits that help boost their financial wellness. Stubborn inflation rates and the continuation of student loan payments have caused many younger workers to have tighter budgets and an expectation for their employers to provide relevant resources.

The status of U.S. student loan debt

According to Education Data Initiative, 43.6 million U.S. borrowers collectively carry $1.766 trillion of student loan debt. The average debt balance per student is estimated to be as high as $40,499, a combination of public and private loan debt.

During the pandemic, the federal government stepped in to provide relief, delaying repayments for struggling borrowers under the Student Loan Payment & Interest Holiday. However, for most borrowers, the payment pause ended in October 2023. And while the Biden administration announced additional student loan debt relief, it’s only expected to affect 80,000 of the nearly 44 million borrowers.

The holistic employee benefits boom

Human resources (HR) experts are seeing a shift. Financial wellness benefits that were once considered “nice to have” perks are taking on a new level of importance as tuition costs rise and employees are more in debt than in the past.

Student debt plays a serious role in an individual’s overall financial outlook and behavior. Per a recent CNBC survey, 81% of people with student loan debt have had to push back life milestones, including buying homes, investing in the stock market, or setting aside funds for retirement.

Business leaders should evaluate their benefits package holistically and ask themselves questions like:

  • What employee pain points do our benefits solve?
  • How can our company help its staff feel more financially empowered?
  • How big of a role would student loan repayment benefits play?

Student loan repayment benefits: An opportunity to stand out

Research shows that 86% of young workers would stay at least five years with an employer if it helped with student loans. Yet, according to the Society of Human Resource Management (SHRM), just 7% of U.S. organizations offered student loan repayment benefits in 2022 (down from 9% in 2021). This gap between employee demand and employer offerings creates an opportunity for small- and medium-sized businesses (SMBs) to stand out among larger companies in the competition for top talent.

Most businesses haven’t offered these plans yet and may have questions about the best way to do so. With the help of a PEO, smaller organizations can access leading student loan repayment benefit plans and confirm they’re taking advantage of applicable tax incentives and up-to-date with relevant laws.

Student loan repayment benefits are designed to help employees (and their family members) find a way to manage their student loans and often include a range of features, including:

  • Self-service tools
  • Live student loan coaches
  • Repayment strategy assistance
  • Optional loan payments made by the employer

Many of these programs can be made available to eligible employees (and their family members) at no additional cost. In addition to appealing to younger staff, these benefits can assist parents of college-bound children plan ways to save and pay for their child’s education. As with all offerings, employers must ensure that the benefit is extended to all eligible employees and administered fairly.

The ins and outs of administering student loan repayment benefits

Two key tax and legal considerations exist for employers looking to offer student loan repayment plans: the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the SECURE 2.0 Act.


Shouldering the entire financial burden of student loan repayment benefits can be tough for businesses, especially SMBs with limited budgets. Luckily, Section 2206 of the CARES Act created a temporary tax-free provision for employer-sponsored student loan assistance programs. Under the Consolidated Appropriations Act (CAA), this benefit has been extended through December 2025.

Here’s how the incentive works: employers may contribute up to $5,250 in student loan repayments per employee per year. Payments are tax-free, whether they are issued directly to the employee or the student loan servicer. A true win-win, the employee doesn’t pay tax on those funds and the employer receives a payroll tax exclusion.

Business leaders can work with their PEO, CPA firm, or financial advisors to ensure they receive the full tax advantage available under this program.

SECURE 2.0 Act

While not part of a student loan repayment benefit program, the SECURE 2.0 Act allows businesses to enable their staff to save for their future as they pay down student loan debt.

The Act gives employers the option to make matching contributions to an employee’s 401(k) according to their plan’s terms, even if the worker isn’t contributing to it.  For example, an organization that matches 100% of employees’ 401(k) contributions up to 5% of their salary can contribute that 5% match, supporting staff struggling to balance student loan payments with retirement savings.

This contribution can help workers reduce their student loan debt without completely sacrificing saving for retirement and allows them to take advantage of the benefits of compound interest as their 401(k) account grows.

Partnering up to provide perks

Today’s employees scrutinize benefits more closely than ever. Partnering with a PEO like ExtensisHR is one way an SMB can jump ahead of competitors in the war for talent. PEOs enable smaller organizations to offer tailored, Fortune 500-level benefits on par with their bigger counterparts. The HR experts at PEOs pay close attention to emerging employee trends and the types of benefits influencing their choice of workplace.

In addition to taking the day-to-day HR administration burden off in-house staff, PEOs help SMBs craft stand-out benefit packages that are compliant with federal and state laws.

For example, ExtensisHR, a nationally recognized PEO, offers its customers access to a full suite of student loan management tools from Tuition IO. This platform (which isn’t a financial institute, bank, or lender) provides:

  • Loan linking and aggregation
  • College funding preparation
  • Refinancing resources
  • Loan payoff projection
  • Repayment strategy finder

Additionally, ExtensisHR offers optional buy-ups for employer student loan repayment, tuition reimbursement, and 401(k) matching programs.

Incorporating student loan repayment benefits into their employees’ total compensation packages can help SMBs attract and retain talent and allow them to contribute to their staff’s overall financial well-being.

How can student loan repayment benefits improve your business? Contact the benefits experts at ExtensisHR today to learn more.

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