The state of student loan debt in the United States has changed substantially in the last twenty years. In turn, employers are doubling down on creative tactics to meet employee needs and step up their talent retention game. By 2020, 45 million Americans had federal student loan debt. That latter figure has more than doubled since 2000, when just 21 million were living under similar circumstances. The cost to borrowers on these loans has ballooned. It has quadrupled, rocketing from $387 billion to $1.8 trillion in the intervening years. Inspired by the escalating crisis, an increasing number of companies are making their move. They’ve turned to student loan reimbursement benefits to recruit and retain talent.
A recent survey revealed that 92% of companies cite attracting talent as the primary reason for providing these reimbursement benefits. Almost as important, 80% of employers report that the drive to retain employees is an important motivating factor. What’s more, more than half of the companies surveyed, 58%, provide these benefits to improve employee satisfaction and loyalty. These policies leave millions of employees drowning in debt, impacting their quality of life and productivity. Due to this, the urgency for such programs has ever grown obvious.
The enactment of the CARES Act marked an important turning point. Currently, employers are allowed to contribute up to $5,250 per year toward an employee’s student loans free of tax penalties. The One Big Beautiful Bill Act has enshrined this shift. It made the tax exclusion for employer-provided student loan payments permanent and, beginning in 2026, it will adjust for inflation.
Businesses are clearly making strides to improve the competitive and valuable nature of their employee benefits. They’ve gone beyond just slapping reimbursement offerings onto employers’ traditional retirement plans. Employers are increasingly choosing to offer a 401(k) plan match to workers who are currently repaying their student loan debt.
What’s different today is that there are more companies providing such loan repayment as a benefit. Yet, in 2024, only 14% of companies we surveyed said their organization had a repayment program established. This is a huge change from only 4% in 2019. What’s more, an additional 18% of businesses are considering adopting or expanding loan reimbursement programs in the next 12 months.
According to Voya’s own research, 42% of those employees say they are more likely to stick with their employer. This retention is motivated by the great help they’re getting regarding their student lån skyld. Everest Global Services we learned that student loan reimbursement benefits are a powerful recruiting tool. These incentives will continue to attract young graduates whose educational debt weighs heavily on them.
“Benefits are a great attraction and retention tool,” – Julie Stich
As more and more employees demand financial wellness, corporate America is starting to listen. They understand that debt can be an enormous drain on workplace productivity. A majority of all workers report being distracted at work by financial stress. This distraction can adversely affect their productivity and job satisfaction.
“Employees who are struggling under the weight of student loans may be distracted at work,” – Julie Stich
One of the companies featured deeply impressed us with the reach their programs can have. They were shocked to find that only 8% of eligible employees took advantage of their new benefit — which offers $150/month for the first two years, $200/month from years three to five, and a $3,000 lump sum after five years. That’s a red flag, as it indicates that targeted participation may be lacking. Those who need it can potentially expect windfall financial relief, starting now.
Expanding movement in a positive direction to adopt and implement such benefits could not be more timely as people everywhere are hit with skyrocketing costs. Lucy Avsharyan noted,
“Supporting them at this critical stage helps ease their financial burden.”
Industry experts like Laurel Taylor emphasize that transforming the tax-free status into a permanent fixture has significantly lowered barriers for employers considering these benefits.
“Employers know this is an area that’s crippling the workplace,” – Laurel Taylor
As federal options and opportunities surrounding student loans change, we are seeing growing interest in student loan services among employers.
“With the federal options potentially changing, we’re starting to see increases in employers’ interest in student loan services,” – Amy Vaillancourt