With the amount of US student loan debt surpassing more than $1.2 trillion and seeing no signs of decreasing anytime soon, companies are adjusting their incentive packages to attract millennials by offering loan repayment programs, which is great. But how exactly does this work and what will it mean for your future?
Although only about 3 percent of companies offer this option bundled into their benefits plan, the trend is starting to catch on, according to US News. Powerhouses Pricewaterhouse Coopers and Fidelity rolled out plans to offer student loan repayment to qualifying employees, a move that will undoubtedly inspire others to follow the same path.
How does Student Loan Repayment Differ from Tuition Reimbursement?
A decades old practice, tuition reimbursement programs provided by an employer pays back the employees for the costs associated with furthering their education that will enhance their skill-set for the job. This is usually limited to the exact amount of tuition owed to the institution.
Loan repayment programs have also been around for many years, but they’ve usually only been provided by federal agencies and public sector employers. They also prove to be more beneficial to debt ridden millennials because the terms usually include repayment of the principal and interest amounts of the student loans.
How does it work?
Since these programs are in its infancy stage, the guidelines are still a little murky, but the gist is that your employer agrees to pay a specified amount toward your student loan debt or reimburses you for up to a specific amount of what you paid toward your student loans in the given year.
Of course, the amount paid and for how long will be contingent on your company, so if offered, be extremely diligent in gaining full understanding of the opportunity.
What’s the Downside?
The Student Loan Genius’ 401(k) Contribution Student Loan Benefit is a fairly new repayment program that several employers are teaming up with in addition to private lenders and finance companies to offer employees student loan refinancing. Keep in mind, while you cannot “refinance” a federal student loan with the government, you can convert your federal loan into a private loan, or combine the two together with a private lender and refinance the new loan at a new rate. While this seems like a dream come true because of the lower interest rate, you’ll lose all your benefits and protections like unemployment deferments and income-driven repayment plans once converted from public to private.
I know this a little daunting to take in all in one sitting, so be sure to stay abreast of developments to student loan repayment benefits via the Student Loan Repayment Assistance Act, a bill that was recently introduced into congress. Your pockets will thank you for it.
MADE by Jasmine Browley