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BUSINESS BANKING & CORPORATE COUNSEL FEATURE

WHAT YOU NEED TO KNOW

IF A CLIENT IS CONSIDERING IMPLEMENTING
A STUDENT LOAN HR BENEFIT

BY REBECCA MAURER

ith a staggering $1.5 is picking up. In 2018 the Society for Human by a biotechnology company in Illinois
trillion dollars of student Resources Managers reported that 4% of which received an IRS Private Letter Ruling
loan debt in the U.S. companies were offering a student loan approving their plan modifications in 2018.
economy, companies are HR benefit. In 2019, that number doubled We will take a deeper dive into each of these
W increasingly seeing their to 8%. Willis Towers Watsons, a leading potential student loan HR benefits and flag the
employees’ student loans as a workplace issue. international benefits firm, recently reported compliance issues you need to know for each one.
In order to increase recruitment and retention, that student loan benefit adoption is expected
more and more companies are taking the leap to exceed 30% by 2022. Refinance Programs
into offering a student loan benefit through their So when a corporate client is considering a If your clients want to consider a refinance
human resources department. student loan HR benefit, what exactly would program, they will need to establish a
If one of your corporate clients is beginning that benefit look like? partnership with a third-party refinance
to consider a student loan HR benefit, what marketplace or refinance program.
compliance issues do you need to know about? What type of student loan HR Benefits are Generally these programs are a relatively
In this article, we will cover the basic trends in out there? light lift for corporate clients, and have
student loan support at the corporate level, discuss Student loan benefits are not one-size-fits-all. correspondingly simple compliance concerns.
the options that companies are considering, and Indeed, there are a wide spectrum of programs The main issue is you may want to
identify legal and compliance issues you should that have been adopted by companies of all recommend avoiding co-branding the
be aware of if a corporate client is considering a shapes and sizes. For the purposes of this refinance program with your client’s
student loan HR benefit for their employees. article, we’ll summarize the dizzying array own corporate information. The Federal
of options into three buckets: (1) refinance Trade Commission recently settled a large
Why would a corporate client offer a student programs; (2) directed payment programs; complaint against SoFi, the most prominent
loan HR benefit? and (3) 401(k) matching programs. student loan refinancer, alleging that SoFi
Student loan debt is now the second largest Refinance programs are designed to help misrepresented how much money student
category of consumer debt in the United employees save money by lowering their loan borrowers could save by refinancing with
States — exceeding credit card and auto debt interest rate. More than 90% of all student loan the company. The FTC sent notice letters to a
and second only to mortgages. debt is federal student loan debt, which often number of other large refinancers regarding
Approximately 60% of the workforce has interest rates between 5% and 7%. Private claims in their advertising material. Overall,
under the age of 40 left school with more refinance companies offer lower interest rates the refinance industry is still re-adjusting
than $10,000 in student debt. In tight talent to entice borrowers to refinance their federal after this recent decision.
markets such as healthcare and technology, loans into private loans. While the FTC has not specifically gone
even a higher percentage of the workforce Under a refinance program, companies enter after any companies that encouraged their
now comes with student loan debt. into partnerships with these refinance companies employees to participate in these refinance
In the face of these staggering numbers, to offer special rates to their employees. programs, it may be advisable to avoid co-
companies have begun to consider whether a By comparison, under directed payment branding for the time being.
student loan HR benefit could be an important programs, companies actually make monetary
tool in attracting and retaining talent. contributions to help pay off their employees’ Directed Payment Programs
Companies who implement these programs student loans. These payments can be If your client is going to consider a directed
hope to see a return on investment by keeping structured as a yearly or monthly payment and payment, there are a few important legal
their employees for longer, decreasing turnover can be modulated based on employee seniority. issues to know about.
and decreasing training costs. Finally, there are 401(k) matching First, it’s worthwhile to consider a third-
It seems the return on investment is programs — a category of student loan party administrator so that your client’s HR
making sense. Interest in these HR programs benefits almost single-handedly created department is not themselves knowledgeable

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