SoFi

In today’s fast-paced and ever-evolving corporate landscape, HR executives play a pivotal role in shaping the financial well-being of their workforce. Companies can foster a more productive, engaged, and satisfied workforce by prioritizing programs that address key financial concerns — spending habits, emergency savings, credit management, student debt, general debt, and retirement savings. Here’s a strategic blueprint for HR executives looking to make a significant impact in their organizations.

Key Priorities

1. Monitoring and Adjusting Spending

It’s crucial for employees to have a clear understanding of their spending habits to manage their finances effectively. HR can introduce financial well-being programs that provide robust budgeting tools and personalized financial advice. These resources help employees analyze their spending patterns, identify unnecessary expenditures, and reallocate funds towards essential financial goals such as debt reduction or savings.

Recommended: Financial Empowerment Calendar for 2024

2. Establishing Solid Emergency Funds

The creation of a reliable emergency fund is essential for financial security. When employees lack financial buffers, they often resort to high-interest loans or dip into their retirement funds to manage sudden expenses like car repairs or medical emergencies, which can have lasting negative financial effects.

By introducing an employer-sponsored emergency savings account (ESA), employers can facilitate easier savings for unforeseen expenses. This initiative can aid employees in handling unexpected costs, circumventing costly debts, and enhancing their financial stability and stress levels. For formal programs, employers have several options (in-plan or out-of-plan), but your organization can also start simpler.

HR departments can promote automated savings techniques, such as the payroll split deposit feature, which automatically diverts a specified portion of each paycheck into a savings account. This method not only ensures regular savings contributions without the need for manual transfers but also helps build a substantial financial buffer that can alleviate stress during unexpected financial situations.

3. Managing Credit and Creditworthiness

A strong credit score opens up financial opportunities for employees and can lead to lower borrowing costs. It is a crucial factor that lenders use to decide if an applicant qualifies for a loan or credit card and the interest rate they will offer. It’s important for workers at all income levels to understand the elements that contribute to their credit scores, such as payment history, the amount of debt they carry, the variety of credit they manage, and the length of their credit history.

HR can organize educational workshops that provide clear guidance on effective credit management strategies. These sessions should cover key aspects such as the importance of making timely payments, keeping credit card balances low, and regularly checking credit reports to ensure accuracy and to identify areas for improvement. In addition, employers can make experts available to answer any questions workers have about what impacts their credit score and how they can monitor it effectively.

Recommended: Measuring the Financial Well-Being of Your Workforce

4. Navigating and Managing Student Loan Debt

Student loan debt can be overwhelming. Providing employees with tools and resources to manage this debt can relieve a significant source of stress within your workforce. And offering this type of support doesn’t necessarily require a significant investment of time or money.

A no-cost way to assist employees in managing their student loan obligations effectively is to promote SoFi at Work’s Navigating Your Student Debt Workbook. This comprehensive tool is designed to help individuals easily navigate and manage their student loan obligations. It guides borrowers through federal student loan repayment options, explores loan forgiveness programs, and creates a personalized repayment strategy. This can empower your workers to make informed decisions that align with their financial situations and long-term goals.

Recommended: Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support

5. Comprehensive Debt Management Strategies

Effective management of overall debt is crucial for financial well-being. HR can facilitate access to debt management plans and financial counseling, which can help employees consolidate their debts, negotiate lower interest rates, and set up manageable repayment plans. These resources are invaluable in reducing the financial burden and stress associated with high levels of debt, thereby improving overall job performance and satisfaction.

6. Strategic Retirement Savings Planning

Educating employees about the importance of retirement planning and the benefits of early investments is crucial. HR should provide information on various retirement savings options, such as 401(k) plans and Individual Retirement Accounts (IRAs). Highlighting the advantages of compound interest and the importance of consistent contributions can motivate employees to start planning early and invest wisely for their retirement.

The Takeaway

HR leaders can significantly enhance their employees’ financial well-being by implementing these strategic initiatives. These initiatives can improve individual employee well-being and contribute to a more stable and productive organizational environment. When employees feel financially supported, they are more likely to be engaged, dependable, and motivated, which is essential for the success and growth of any organization.

SoFi at Work can help. We’re experts in the employee education assistance space. With SoFi at work, you can access platforms and information that will help build the benefits needed to create a successful and loyal workforce.

Photo credit: iStock/VioletaStoimenova

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery, or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). 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 SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2024 Social Finance, LLC. All rights reserved. Information as of April 2024 and is subject to change.


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.

SOAW-Q324-003

In the evolving landscape of employee benefits, HR professionals are increasingly recognizing the importance of supporting their workforce in managing student debt. With the resumption of federal student loan payments last year, the nearing end of the federal on-ramp, and the introduction of innovative matching programs, there’s a pressing need for HR teams to stay informed and proactive. Here’s a closer look at the current state of student loan benefits and how HR can effectively implement these programs to enhance financial wellness in the workplace.

Understanding the Impact of Student Loan Debt

Student loan debt remains a significant burden for millions of Americans, with many employees seeking positions that offer not just a paycheck, but also help in managing this debt. Recent surveys, such as the Employee Benefit Research Institute’s 2022 Financial Wellbeing Survey , indicate that nearly three-quarters of employers are now offering or planning to offer student loan debt assistance or tuition reimbursement programs. This shift underscores the growing recognition that student loan benefits offer significant value — not just for workers but also employers. SoFi at Work’s 2024 Future of Workplace Financial Well-Being study found that employees spend a full 8.2 hours dealing with finances every week while at work.

Analyzing the currently available data from the Department of Education (ED), we found that while total loan forgiveness approved by the Biden-Harris Administration has jumped to $167 billion for 4.75 million
borrowers , that still leaves roughly $1.73 trillion in student debt outstanding for 43.2 million borrowers. This means that there are still a significant number of individuals in the workforce and about to enter the workforce who will still be working on paying down their student debt.

This will be particularly felt in a few key talent segments. Older borrowers represent an increasing proportion of borrowers who carry federal student debts, both in terms of the number of borrowers and the amount they owe (14% of borrowers are aged 50-61 and have federal student debt with an average balance of $44.2K). Additionally, among borrowers under 40, first-generation borrowers are about three times more likely to be behind on their payments than borrowers whose parents also attended college.

HR professionals should also be aware of the upcoming end of the federal student loan “on-ramp” period and the grace period for 2024 graduates. Specific to this year, as federal student loan repayments resumed, the ED introduced a temporary “on-ramp” period until September 30, 2024. During this time, borrowers who fail to make payments do not face default. The program was aimed to assist borrowers who might find it challenging to resume payments after the pause of almost four years.

Shortly after the on-ramp ends, most of the graduating class of 2024 (those who tossed their caps in April, May, and June this year) will experience the end of the standard federal loan grace period. Most federal student loan types have a six-month grace period after graduation, leaving school, or dropping below half-time enrollment. This means these employees will likely start their repayment journeys in September, October, and November.

It is shaping up to be a busy Open Enrollment season!

Recommended: Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support

Legislative Enhancements: The CARES Act and Secure 2.0 Act

The introduction of the CARES Act and the subsequent Secure 2.0 Act has provided HR teams with new tools to support their employees. Under the CARES Act, employers can contribute up to $5,250 annually per employee towards student loans on a tax-exempt basis through 2025. By enhancing Section 127 benefits, this provision not only aids employees but also offers payroll tax exclusions for employers, making it a mutually beneficial arrangement.

Further expanding the horizon, the Secure 2.0 Act, effective from January 2024, introduces the option for employers to match their employees’ student loan payments with contributions to their retirement accounts. Companies like Chipotle and Kimley-Horn have already adopted this innovative approach, allowing employees to address their student debt while enhancing their retirement savings, presenting a win-win scenario for financial wellness.

Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?

Implementing Student Loan Repayment Benefits

For HR professionals looking to implement or enhance student loan repayment benefits, several key considerations must be addressed:

Direct Educational Assistance Benefits (Section 127 Provisions)

•   Determine the contribution level. While the maximum tax-exempt direct contribution stands at $5,250, companies can start with smaller amounts, such as $25 to $100 per month, which can still significantly reduce the interest burden for employees.

•   Consider tenure and eligibility. Some companies may tie these benefits to tenure, requiring a certain period of employment before employees can qualify, which can aid in retention.

•   Ensure compliance. While there are still several open questions for the IRS to clarify, it’s crucial to have a program document that complies with IRS regulations and coordinates with any other educational assistance programs offered by the employer.

Recommended: Understanding Educational Assistance Programs: A Comprehensive FAQ

Qualified Student Loan Payment Matching (Secure 2.0 Act Provisions)

•   Understand the timeline for qualified student loan payments. When setting up a qualified student loan match, plan advisers and sponsors must be clear on the timing of when these payments may be reported. This is crucial because the timeline for these matching contributions differs from that of a traditional 401(k) deferral match. Understanding and communicating these timelines can ensure smooth implementation and compliance.

•   Don’t exceed matching fund limits. When it comes to the level of matching funds that are available, it’s important to note that contributions that exceed the 402(g) limit, which is the maximum amount of money employees may defer to their 401(k) plan each year, may not be matched. For 2024, this limit is set at $23,000. The traditional 401(k) rule for matching, which allows matching only up to this limit, remains in effect. This ensures that the matching contributions are made within the legal financial thresholds.

By carefully considering these aspects, HR professionals can effectively implement student loan repayment benefits that help employees manage their debt and align with regulatory requirements and fiscal prudence.

The Role of HR in Facilitating Smart Debt Management Without a Formal Program

Beyond implementing direct financial benefits, HR can be pivotal in educating and supporting employees in managing their student debt. If your organization is not yet ready to implement Direct Educational Assistance Benefits or Qualified Student Loan Payment Matching programs, consider starting with providing resources like the SoFi at Work’s Navigating Your Student Debt Workbook and organizing workshops on student loan management. Both offerings can empower employees to make informed decisions about their repayment options.

In addition, the SoFi at Work Guide to the Restart of Federal Student Loan Repayments was developed explicitly to help borrowers reestablish their financial footing after the federal loan pause. This relevant guide provides essential information on smoothly transitioning back into making repayments. Additionally, it includes valuable resources and advice on budgeting, saving, and enhancing financial health overall.

Recommended: The Student Loan Crisis and Its Impact on Borrowers

The Takeaway

As we navigate a landscape where student loan debt remains a critical issue for many workers, the role of HR in facilitating debt management and financial wellness is more important than ever. By leveraging legislative tools and providing educational support, HR professionals can significantly impact their employees’ financial health and, by extension, their overall job satisfaction and loyalty. This proactive approach not only enhances the company’s appeal to top talent but also fosters a supportive workplace culture that recognizes and addresses the real-world challenges its team members face.

Photo credit: iStock/ArLawKa AungTun

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery, or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). 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 SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2024 Social Finance, LLC. All rights reserved. Information as of April 2024 and is subject to change.


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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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.

SOAW-Q324-004

Navigating the complexities of educational assistance programs can be challenging for employers and employees alike. Recent legislation changes have expanded how employers can provide direct and indirect education assistance. Still, the new tax incentives offered by the Secure 2.0 Act and Section 127 can be confusing. While they sound alike, they take different approaches to the same problem.

In this article, we’ll provide a detailed FAQ based on section 127 of the Internal Revenue Code to help you understand how these benefits can be leveraged, whether you’re an employer, employee, or self-employed individual.

What Is an Educational Assistance Program?

An educational assistance program is a plan established by an employer to provide educational benefits to its employees. To qualify under U.S. Code § 127 – Educational Assistance Programs , the plan must be in writing and meet specific requirements. These programs are designed to support employees in furthering their education, covering expenses such as tuition, qualified education loans (as defined in section 221(d)(1) of the Code ), fees, books, and supplies.

Most importantly, these programs have the benefit that they are tax-free, up to $5,250 per calendar year. This means the benefits provided under this threshold are not included in the employee’s gross income nor reported as wages on their Form W-2.

Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?

Can Educational Assistance Cover Loan Payments?

Yes, under certain conditions. Payments on principal or interest of qualified education loans are considered educational assistance benefits if made after March 27, 2020, and before January 1, 2026. These payments must be for the employee’s education and not intended for a family member’s education. The total combined limit for these payments and other educational assistance is still $5,250 annually.

This section of the Code is most commonly referred to as the “CARES” provisions of Section 127, as these amendments were part of the broader Coronavirus Aid, Relief, and Economic Security (CARES) Act package. The CARES Act provision was set to expire at the end of December 2020, but Congress passed the Consolidated Appropriations Act before that happened, extending the tax break through the end of 2025.

The IRS discusses what qualifies as an eligible loan in more detail here.

Recommended: Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support

Are There Restrictions on the Types of Courses Covered?

Per the Code, educational assistance benefits can not cover payments for the following items:

•   Meals, lodging, or transportation.

•   Tools or supplies (other than textbooks) that you can keep after completing the course of instruction (for example, educational assistance does not include payments for a computer or laptop that you keep).

•   Courses involving sports, games, or hobbies unless they:

◦   Have a reasonable relationship with the business of the employer

◦   Are required as part of a degree program

An employer can further define what their program will or will not pay for as long as it meets the other requirements of the provision.

Recommended: Guide to College Tuition Reimbursement

Who Can Benefit From These Programs?

Educational assistance programs are intended for the exclusive benefit of employees. They cannot discriminate in favor of highly compensated employees or disproportionately benefit shareholders or owners. However, self-employed individuals and owners who meet specific criteria can also receive benefits, though not more than 5% of the total benefits provided can go to owners or their families.

Recommended: The Student Loan Crisis and Its Impact on Borrowers

What Happens if Benefits Exceed $5,250?

Suppose educational assistance benefits exceed $5,250 in a given tax year. In that case, the employer must include the excess amount in the employee’s gross income, subject to relevant business and income tax.

Both employers and employees should keep track of these benefits to ensure they are reported correctly. This is especially important for employees who change organizations within a given tax year, as the total assistance they receive can be at most $5,250, regardless of the employer paying it. Additionally, any “unused” amounts of the $5,250 annual limit cannot be carried over by the employer/employee to subsequent years or retroactively applied to previous years of employment.

Can Educational Assistance Be Used for Non-Employees?

Generally, educational assistance benefits are exclusively for employees. Benefits extended to spouses or dependents do not qualify under section 127 and must be included in the employee’s gross income unless they also qualify as employees.

How Do Employers Benefit From Offering These Programs?

Employers can deduct the costs of educational assistance up to the $5,250 limit per employee per year as a business expense. This helps employers support their employees’ pursuit of higher education and skill development while also benefiting from tax incentives. Education assistance initiatives can enhance the workforce’s expertise and knowledge, boost employee morale and productivity, and decrease staff turnover.

Recommended: How Student Loan Benefits Can Help Retain Employees

What Should Employers Include in an Educational Assistance Plan?

An effective educational assistance plan should clearly outline the eligibility criteria, types of benefits provided, conditions for receiving benefits, and procedures for claiming benefits. Employers may customize their plans to include provisions for part-time employees and/or prorate benefits based on employment tenure, or even grades received at course completion.

Here is an example plan document that outlines an Educational Assistance Program. Though it will have to be adapted to your organization’s unique needs and policies, this template can help you meet the written plan requirement.

The Takeaway

Educational assistance programs offer valuable benefits that significantly reduce the financial burden of furthering education. Both employers and employees stand to gain from well-structured programs that align with IRS guidelines. As these programs are subject to specific IRS rules and potential legislative changes, staying informed through reliable sources like IRS publications and updates is crucial for maximizing the benefits while remaining compliant.

For more detailed information or specific scenarios, visit the IRS website . You may also want to consult with a tax professional, who can provide guidance tailored to individual circumstances.

SoFi at Work can also help. We’re experts in the employee education assistance space. With SoFi at work, you can access platforms and information that will help build the benefits needed to create a successful and loyal workforce.

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery, or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). 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 SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2024 Social Finance, LLC. All rights reserved. Information as of April 2024 and is subject to change.


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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

SOAW-Q324-005

HR pros know that helping employees with debt, particularly student loan debt, is a key ingredient to building financial wellness in the workforce. With 44 million Americans carrying a total of 1.7 trillion in student debt, it’s the rare employer that doesn’t have a significant number of employees with substantial student loans.

Not surprisingly, many HR leaders are looking at how they may be able to help. In the Employee Benefit Research Institute’s 2022 Financial Wellbeing Survey, nearly three-quarters of employers said they currently offer or plan to offer student loan debt assistance or tuition reimbursement programs.

Despite the need and desire, implementing these benefits can be challenging. Recent legislative and executive actions concerning student loan repayment and forgiveness have been confusing. Employers are naturally wondering what role they should play in student debt repayment and what benefits can best help.

Here, we’ll look at two important student debt repayment benefits, how they work, and how they can best be implemented to attract and retain talented workers and enhance overall financial wellness among your employees.

Recommended: What Employers Need to Know About Student Loans in 2023

Student Loan Repayment Benefits

Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, employers can contribute $5,250 annually per employee toward tuition reimbursement or student loan payments on a tax-exempt basis. That means employees won’t pay income tax on contributions made by their employers toward educational assistance programs, yet the employer also gets a payroll tax exclusion on these funds.

Employers can make the payments directly to their employees’ student loan servicers or lenders, or they can provide them to the employees themselves, who can then put them toward their student debt.

The CARES Act provision was set to expire at the end of December 2020, but Congress passed the Consolidated Appropriations Act before that happened, extending the tax break through the year 2025.

Here’s what to consider when offering student loan repayment benefits.

How Much Will You Offer?

The maximum allowed annually on a tax-exempt basis is $5,250 per employee but employers do not have to provide that much. Many organizations start with a $50 to $100 a month payment. Even this seemingly small amount can help employees save thousands of dollars in interest over the life of the loan if directed toward the principal.

The amount you’ll contribute likely depends on the overall costs you are willing to dedicate to this benefit. An employee survey or other demographic data can help you determine how many of your workers carry student debt and would likely qualify for this benefit, which can help you understand the cost. In addition, you may want to look at future hiring trends for the next several years to estimate the number of new employees likely to join the program.

Will You Tie Benefits to Tenure?

Some employers require a time commitment — such as three to five years at the company — in exchange for the student loan payments. Others may simply delay the benefit for new employees for six months or a year.

In determining the qualification surrounding your program, you’ll need to weigh the immediate need for student loan relief among your workers and your need for higher retention and recruiting rates.

Is Your Paperwork in Place?

A program document outlining the design of the student loan contribution plan that complies with IRS regulations is necessary to implement this benefit.

You’ll also need to make sure this benefit works with any other existing qualified education assistance programs you may offer, such as tuition reimbursement.

The $5,250 tax-exempt limit applies to all tuition programs. So, if an employee receives reimbursement for a certification class, for example, and is eligible for student loan forgiveness payment for their undergraduate degree, the total of the two benefits per year for that employee cannot exceed $5,250. Anything above that amount will be considered taxable wages.

Matching Contributions for Student Loan Repayment

The Secure Act 2.0, which President Biden signed into law late in 2022, is designed to encourage more American workers to save for retirement. The act also formally authorizes matching contributions for student loan repayment, allowing companies to match employees’ qualified student loan payments with contributions to their retirement accounts, including 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans.

Many HR leaders see the benefit as a win-win for employees. It allows them to pay down student debt while still participating in retirement savings, hopefully starting at an early age. The provision also benefits employers looking to offer a creative benefit to retain and recruit workers, as it removes many of the preexisting legal barriers and administrative complexities that discouraged some companies from adopting a student loan repayment feature.

Here’s what to know about the matching contributions for student loan payments program.

The Rules Are (Mostly) the Same for All Matches

A student loan matching benefit must abide by all the rules of a traditional match. This means that the eligibility criteria, matching contribution rate, and vesting schedule you apply to matching contributions on student loan payments must be the same as those you apply to elective deferrals.

There is, however, one small difference: You are allowed to deposit the matching contributions to the employee’s 401(k) plan account less frequently than regular matching contributions, as long as you contribute at least annually.

Only Qualified Student Loan Payments are Eligible

Student loans must be qualified for repayments to be matched. That generally means any loans borrowed solely to pay for higher education expenses for the employee, their spouse, or a dependent. This includes refinanced student loans but not loans from a relative or retirement plan.

Loans eligible for repayment must have been used to pay for qualified education expenses including tuition, fees, books, supplies, equipment, and room and board for students enrolled at least half-time.

To receive a match, employees simply need to certify annually that they have made qualified student loan payments and the amount of these payments. Plan sponsors are allowed to rely on an employee’s certification and do not need to conduct an independent evaluation as to whether the payments meet all of the requirements to be qualified student loan payments.

Implementation Date

The match becomes available in 2024 for plan years starting after December 31, 2023. This gives employers some time to research employee needs and draft a plan. It also provides time for the IRS to offer some additional details on the implementation and administration of the matching provision.

Recommended: How HR Pros Can Ease The Return to Student Loan Repayment

The Takeaway

Benefits that can help ease the burden of student debt are important tools employers can utilize to recruit and retain talent and promote financial wellness among employees. This is especially important now that the payment pause implemented during the pandemic is ending and workers will once again be facing monthly student loan payments. Student loan repayment and matching contribution programs are two benefits employers may want to consider in this current environment.

SoFi at Work can help. We’re experts in the student lending space. With SoFi at work you have access to platforms and information that will help build the benefits you need to create a successful and loyal workforce.

FAQ

Are student loan payment benefits tax-exempt?

Yes, with some qualifications. The CARES Act allows employers to provide up to $5,250 annually per employee for student loan repayment on a tax-exempt basis through 2025.

Can employers offer student loan payment matches in retirement accounts?

Yes, a provision in Secure 2.0 (legislation signed into law in 2022) allows companies, starting in 2024, to match a worker’s student loan payment in the form of a contribution to their workplace retirement plan.

What are the advantages of student debt repayment benefits?

Student loan repayment benefits can help attract and retain talented workers. They can also increase productivity among your employees by reducing the stress created by burdensome student debt and boosting overall financial wellness.

Photo credit: iStock/insta_photos

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery, or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). 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 SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2024 Social Finance, LLC. All rights reserved. Information as of April 2024 and is subject to change.


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.

SOBD0623003

It’s a win-win situation. When employers help employees become homeowners — even in small ways — workers may feel even more loyal to them. And employees who own their homes are far less likely to relocate and change jobs.

The reasons aren’t hard to figure out. Homeownership can be a major contributor to employees’ overall financial well-being, security, and stability, all of which can add to their productivity and satisfaction on the job. Employer-sponsored homeownership benefits also help build strong communities, and strong communities are almost always good for business.

The need for employer help may be greater now than ever. Stubbornly elevated home prices, the uptick in mortgage rates, low housing inventory, and the high overall cost of living have meant that it has been harder for employees, particularly workers under age 35, to afford to buy their own homes. For many first-time home-buyers, the only option is to move to a lower-priced housing market. If those employees can’t work fully remotely, they may simply switch jobs.

The widespread lack of affordable housing in many areas can also make it difficult for employers to attract and retain the best hires. According to data from Gallup, the cost of replacing an individual employee can range from half of to two times the employee’s salary.

The ultimate result? A huge challenge for HR professionals.

Offering home buying benefits can help. Numerous companies, understanding the link between homeownership and retention, have introduced homeownership benefits to help build a loyal, productive workforce that can further advance their business objectives.

Below are some of the ways employers can help their workforce become satisfied homeowners. After studying your workforce demographics and your budget, you may find inspiration among the various approaches below.

Homebuyer Education and Counseling

Knowledge is one of the most cost-effective benefits there is. Consider pairing up with area mortgage experts, financial counselors, and others to produce on-site or virtual information seminars on various homebuying topics. Banks, mortgage brokers, and real estate brokers in your area may be willing to offer free information sessions at your organization in hopes of generating clients. Or you may find one of the many homebuyer consultants available to help educate your workforce.

These programs can provide interested employees with the basics on the local market, different types of mortgages and their rates, mortgage insurance, down payment assistance, legal issues related to homeownership , foreclosure prevention, and much more. And an informed employee can avoid the financially costly mistakes that can so often be part of real estate purchases.

Recommended: How Homeownership Can Help Build Generational Wealth

Credit Counseling

A good credit score is key to qualifying for a mortgage with favorable rates. Employer-sponsored credit counseling can help employees learn how to check their credit scores and, if necessary, take steps to improve them. Consider partnering with a respected credit counseling firm to conduct in-house or virtual workshops or allowing employees time off to attend approved credit counseling seminars outside the workplace.

Recommended: Supporting the Financial Well-Being of Newly Hired Recent Graduates

Down Payment Assistance Programs

With home prices as high as they are in many markets throughout the U.S., saving up a down payment of 10 percent to 20 percent or more can be a barrier to homeownership for many workers.

Employers can help in two ways. They can offer direct financial assistance. This usually entails paying a percentage of an employee’s down payment with a dollar amount maximum.

Employers can also help employees access government-sponsored grants and low-interest loans designed to help first-time homebuyers cover down payments and/or closing costs. Your state’s housing finance agency and your local housing authority likely have first-time homebuyer programs. Many offer qualifying buyers grants that don’t have to be paid back. Others have low or no-interest loans that often don’t have to be paid back until the house is sold or refinanced. As a rule, these programs aren’t broadly advertised, so employers who help workers find and apply for such assistance can play an important role in securing these funds.

Help Finding and Paying Real Estate Professionals

Consider partnering with a local bank or mortgage broker to help employees find home financing. In return for the potential mortgage clients, you may be able to negotiate lower closing costs and fees for your employees that your firm also might or might not help subsidize.

A partnership between your firm and local realtors can provide workers with special help in the house-hunting process. And a relationship with local real estate lawyers or access to your own firm’s legal expertise can help lower legal fees associated with home buying for your employees.

Professional relocation services can help with home buying when an employee moves from one area of the country to another. However, with the rise of remote work, this is increasingly less common.

Important Extras

There are lots of small but important and cost-effective gestures employers can make when employees are finishing up with the home buying experience. Extra days off (with pay) for closing and moving, for instance, can reduce stress and produce goodwill.

When the deal is done, it’s a nice gesture to acknowledge the new homeowner with a card or housewarming gift. Be sure to remind your employees that you or your expert partners can help answer any follow-up questions that come with homeownership.

You’ll also want to make sure that learning to manage mortgage payments and home ownership is part of your employees’ overall financial well-being picture. Your wellness programs may be able to help with budgeting for home improvements, maintenance, insurance, and other costs your employees may not have anticipated with home ownership.

The Takeaway

Employers can’t be the only resource employees turn to when it comes to buying a home. But a company that has a workforce full of employees of home buying age may find that it can fill an important need and, in the process, help keep its workforce steady, loyal, productive, and satisfied.

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

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