Student loans are an important factor in determining the ability of young adults to take on a mortgage and start their own family. When combined with taxes, student loan debt can increase the interest burden that many borrowers experience. To help ease this burden, employers have been able to offer employees private repayment plans as part of their benefits package or through payroll deduction – but only if they’re allowed by law.

The “cares act student loan repayment by employer” is a law that was passed in 2010. It allows employers to help their employees pay back their student loans. The law also provides some protections for the employee and the employer.

Employers now have another crucial opportunity to assist their staff in preparing for what could be a major shock to their finances thanks to the latest extension of the COVID-19-related halt on federal student loan repayments.

Federal student loan payments were halted, and interest rates were lowered to 0% under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It was planned for the most recent pause extension to terminate by the end of January 2022. However, the Biden Administration said that the hiatus would last until May 1, 2022, in late December.

That’s excellent news for the almost 43 million Americans with federal student loan debt of some kind. The fact that many firms were creating or improving student debt assistance programs in advance of the initial deadline is also excellent news for them. With this most recent extension, employers have an additional window of time to assist staff in getting ready for repayment and ensuring a seamless transition.

Refinancing student loans: Benefits and Drawbacks

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Why Should We Pay Off Student Loans?


An employer student loan program may aid in reducing a significant source of financial stress among employees, which will increase productivity and engagement.

Despite the delays, many people find the payment restart to be intimidating. According to a Spring 2021 Pew Charitable Trusts study of 2,806 participants, more than two-thirds of borrowers said that it would be difficult to start making payments again if they began the next month. Key components of financial wellbeing, like as retirement contributions and emergency savings, may be sacrificed by employees whose budgets are already tight due to the epidemic in order to restart student loan payments.

We sometimes assume that student debt is just a problem for fresh graduates, but more workers than you may think are affected. According to, over 68 percent of those with student debt are between the ages of 25 and 50. In fact, the average outstanding debt for borrowers between the ages of 35 and 48 is $42,800.

Including student loan repayment assistance in a larger financial wellness program may help your business maintain and attract a sizable section of the workforce that has student loan debt. It’s more crucial than ever for businesses to stand out in the marketplace during the Great Resignation, or what now seems to be the Great Reshuffling.

Photo courtesy of SoFi.

How Businesses Can Help


We at SoFi at Work support a comprehensive strategy for repaying student debt. That entails assisting staff members in maximizing the most recent repayment extension as well as assisting them in better understanding how student loan payback fits into their short- and long-term financial objectives.

To assist your staff in reaching their payback targets, take into account these four simple yet powerful action items.

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1. Make available a tool for assessing financial health


Asking your staff what they need is one of the finest methods to learn what you can do to encourage financial health among them. If you haven’t done so previously, you may want to create an online financial health assessment poll that examines the four pillars of financial stability — spending, saving, debt, and future objectives — and invites participation from all workers.

An efficient self-assessment survey helps you to gauge the financial health of your staff and gives you an inside look at any potential financial hardships your workers may be facing.

Additionally, when workers complete a well-written, meaningful survey, they are doing more than simply providing information—they are also formulating their own financial health plan. Numerous online evaluation tools provide suggestions for the next stages depending on how users feel about their existing circumstances.

Whatever assessment instrument you decide to use, be sure to include questions on student loan debt and the end of the payment moratorium.

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2. Promote a Step Ladder Direct Deposit Repayment Strategy


Employees now have additional time to prepare for student loan payments thanks to the most recent extension. Offer a step-ladder return to repayments beginning right away as one strategy to assist people take advantage of it. In addition to ensuring that workers get their monthly salary when payments restart, this may lessen the shock of payback.

How it works: First, HR experts may advise staff members to assess their student debt and determine how much they will have to pay each month beginning in May. The employee may then create a separate account designated just for repaying student loans. After opening the account, customers may next set up a graduated direct deposit (DD) that begins with a little DD per pay period (ppp) and builds up to the full DD required for the loan installments.

Damir Khabirov/Istockphoto is the source of the image.

Example of Graduated Direct Deposit


Using an employee with a $500 monthly loan payment, three months of preparation time, and biweekly compensation, let’s see how to compute a progressive DD:

  • Take out $50 each month, or 10% of the anticipated monthly student loan payment, in the first month. At the end of the month, $100 will be in the designated account.
  • Take out $100 ppp, or 20% of the anticipated payout, in the second month. At the conclusion of month 2, $300 (before interest) will be available in the designated account.
  • Take out $150 per person in the third month, or 30% of the anticipated payment. By the end of the third month, there will be $600 in the dedicated account, which will be enough to meet the first payment and have some left over for the subsequent one (ignoring any interest that may have accrued).
  • Take out $250 per person or 50% of the payment in the fourth month. They now have the money they need to make their future student loan installments.

This diagram illustrates how it works for employees who start in January, but it also functions just as well for those who start in February. The DD amount may be changed to allow them to start later. HR managers may assist workers gradually get used to having less discretionary income by supporting this approach and preventing the financial “cliff” of payback.

If employers wish to take this tactic a step further, they may also create a short-term contribution scheme where they match the employee’s contribution (more on this below).

Photo courtesy of SoFi.

3. Educate Workers on the Value of a High Credit Score


Many workers may decide that financing a large student loan debt may assist relieve the month-to-month burden when they assess their student loan status in light of the repayment deadline. In the meantime, companies might advise staff members on the value of having a strong credit score when filing for debt consolidation and student loan refinancing.

This is particularly essential in light of recent signals from the Federal Reserve that it may hike interest rates soon, a move that would make borrowing more expensive and a strong credit score more crucial.

Consider providing your staff with ways to monitor their credit ratings as well as advice on how to raise them, such as by providing seminars or credit counseling.

Any financial wellness program that may help workers enhance their financial situation—by making student loan payments more manageable, obtaining a mortgage, or obtaining better rates and conditions on credit cards and other forms of loans—must include building excellent credit.

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4. Inform workers that they may use a 529 plan to pay off debt.


The SECURE Act, which was approved in December 2019 and is known as “Setting Every Community Up for Retirement Enhancement,” also contains a provision to assist with student debt payments. Now, you may take out $10,000 tax-free from a 529 plan to pay down student loans.

Unfortunately, a lot of debtors aren’t aware of this modification or the fact that current and past students may create their own 529 plans. Employees may create this kind of account and take advantage of all the tax advantages associated with a 529 plan while saving for debt repayment (as well as tuition, of course).

Employers’ total student debt and financial wellness programs may be improved by whatever efforts they make to educate their workforces about this significant shift.

If you don’t already, you may wish to provide a 529 payroll deduction program to encourage workers to contribute to state-sponsored 529 college savings plans.

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Rules for the New Student Loan Repayment Benefit


The CARES Act provided more than just a delay in payments. Additionally, a clause encouraging businesses to provide perks for student debt repayment was introduced. Through 2025, employers may now contribute up to $5,250 yearly toward an employee’s student debt repayment. The employee or the student loan provider may receive these payments directly.

Employer donations to educational aid programs are exempt from income tax for employees, and the employer also benefits from a payroll tax exclusion on these payments. Many businesses have started giving perks for student debt repayment as a result of this move.

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The Lesson


A sizable portion of the American workforce is in debt due to student loans, and on May 1, 2022, federal student loan payments will start up again after a gap of more than two years. Many employees may thus find it difficult to restart these payments.

Employers have the chance to lower employee stress, increase retention and engagement, and differentiate themselves in the market by implementing a financial wellness program that incorporates student debt help.

SoFi @ Work provides a variety of tools, such as financial wellness assessment questionnaires, set-and-forget savings plans, and student debt refinancing and repayment platforms, to assist your workers in managing student loan payback.

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SoFi at Work is offered by Social Finance Inc. SoFi loans are offered by SoFi Lending Corp. or an Affiliate (dba SoFi), licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 . The Student Debt Navigator tool and 529 Savings and Selection tool are provided by SoFi Wealth, LLC, an SEC-Registered Investment Adviser. For additional product-specific legal and licensing information, see Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. SoFi Checking and Savings SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA  / SIPC . SoFi Bank Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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Employers can help employees pay back student loans. Here’s how. Employers can offer their employees tax-free student loan repayment benefits in order to attract and retain top talent. Reference: tax-free student loan repayment benefits for employers.

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  • sample employer student loan repayment program
  • can my employer pay off my student loans
  • irs employer student loan repayment
  • section 127 student loan repayment
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