Many recent grads entering the workforce are carrying a heavy student debt load, which is why an increasing number of employers are beginning to offer student loan repayment assistance as an employee benefit. In fact, a number of newer startups are building an industry around facilitating such programs, making it easier for employers to offer the benefit and track its effectiveness in attracting and retaining employees. Student Loan Genius, a 2013 startup, is one of them.
Along the way, Student Loan Genius discovered that many young employees were just as interested in saving for retirement as they were in paying down student loan debt, yet they felt hamstrung by their large monthly loan payments. So, the company introduced a companion benefit allowing employers to match employee loan payments with an employer contribution to their retirement plan. Just launched in 2017, the Genius Match is expected to be one of the fastest growing perks in companies trying to attract younger employees.
What Services Does Student Loan Genius Offer?
Austin, Texas-based Student Loan Genius was founded by young college grads, who themselves faced the challenge of navigating the complex world of student loan repayment. They found that most student borrowers are prone to making costly mistakes in structuring their repayments. With its mission to improve the financial wellness of young employees, Student Loan Genius first started offering Genius Advisor as an employer-sponsored advisory tool for employees. The educational tool and one-on-one advice helps employees navigate a myriad of repayment scenarios to find the one best suited for their financial situation. Users state they are able to reduce their loan payments by an average 38% based on the advice.
On top of Genius Advisor, Student Loan Genius layers on a platform for employers to offer student loan assistance in the form of matching payments towards employees’ student debt. The benefit can be offered as a percentage of the employee’s monthly loan payments or earnings. According to a NerdWallet study, employees who participate in this benefit can shorten their loan terms by up to three years and save as much as $4,000 in interest costs.
Its newest offering is Genius Match, which, for employees interested in saving for retirement while paying down their loans, affords them the opportunity to do both. Instead of a contribution toward their loan, Student Loan Genius makes a contribution toward their retirement plan when employees make student loan payments. Genius Match may have more appeal for companies because the employer contribution to a 401(k) plan is not only tax-free to the employee; it is tax deductible to the company. Student loan repayment contributions are currently not tax-free, nor are they tax deductible to the company.
Who are its Biggest Clients?
Student Loan Genius is amassing an impressive number of high profile clients, including Prudential, John Hancock, and Pinterest. Companies targeting younger workers, such as BP3, Trendkite, SurveyMonkey, and Twillo consider the Student Loan Genius student loan benefit platform essential to meeting their hiring needs.
Who are the Competitors?
With only 4% of employers offering a student loan assistance benefit, you can expect the competition to heat up in such a wide open market. Companies such as Tuition.IO and Gradifi are the biggest competitors in the student loan repayment assistance space. As far as the Genius Advisor, EdAssist is another leading provider of employee resources for understanding and managing student loans. However, Student Loan Genius, which introduced Genius Match, the first company 401(k) match benefit, has no apparent competition at the moment.
What is the Downside to Student Loan Reimbursement Benefits?
The only real downside for student loan assistance plans as a benefit is that the IRS considers the loan payment contribution made by employers to be taxable income. Any contribution made by employers is not tax deductible. That is not the case for tuition reimbursement benefits which allow up to $5,250 a year to be reimbursed to employees free of taxes and allows a full tax deduction for employers. The Genius Match program manages to overcome that restriction because the employer contribution is made to a 401(k) plan. Recognizing the impact that student loan reimbursement benefits can have on the financial well-being of young employees, Congress has introduced legislation that would make student loan reimbursement the same as a contribution to a 401(k) plan, allowing for reimbursements of up to $5,250 a year with a $50,000 lifetime cap.
The Employer Participation in Student Loan Assistance Act, introduced in April 2017, is the latest legislative attempt to lift the tax restrictions on the benefit. The legislation is said to have much more bipartisan support than previous bills.
Author: Jeff Gitlen
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