Evaluating the Effectiveness of Employer-Provided Student Loan Repayment Assistance Programs

This paper analyzes employer-provided student loan repayment assistance programs to determine their overall effectiveness for clients who are federal student loan borrowers. Borrowers who have a manageable student loan balance and are planning on paying off their federal student loans on the standard 10-year repayment plan can benefit from employers providing student loan repayment assistance programs. Borrowers who have a high debt-to-income ratio and are planning on receiving loan forgiveness under an income-driven repayment plan should consider negotiating for additional compensation or additional employer-provided retirement plan contributions instead of participating in an employer’s student loan repayment assistance program. Borrowers who will qualify for public service loan forgiveness should negotiate for additional compensation or decline participating in the employer’s student loan repayment assistance program unless the employer’s assistance is not considered taxable income to the employee. Example cases illustrate how financial planners can evaluate effective repayment strategies for clients with large federal student loan balances. Recommending that borrowers pay down federal student loan debt quickly may not be the best decision in all circumstances.