Welcome back to “Ask an Advisor,” the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.
For Americans with student debt, the past four years have been a roller coaster.
First there was a Covid-era pause on student loan payments — but that expired. Then President Joe Biden signed an executive order forgiving $430 billion in student debt — but the Supreme Court overruled it. Then Biden introduced the SAVE (Saving on a Valuable Education) plan, which made repayment cheaper for millions of borrowers — but federal courts blocked it, and the Supreme Court declined to save it.
But for some borrowers, one lifeline is still available: educational assistance programs (EAPs). This benefit is offered not by the Biden administration, but by the IRS, and is paid not by the government, but by employers.
Under the U.S. tax code, employers can choose to pay for their workers’ educational expenses — including student loans — and the money is not taxed. For a borrower, that can mean up to $5,250 per year in loan payments, either as part of their salary or in addition to it. Even if the money is subtracted from their pay, that’s a better deal for the employee, because it goes directly to their loans without taking a hit from income taxes.
READ MORE: Student debt thwarts Americans saving for retirement
But that’s only if the company offers it. One borrower in New York wants to persuade her employer, a law firm, to provide this assistance. And like a good lawyer, she’s doing her research before she makes her argument — by talking to financial advisors.
Here’s what she wrote:
Dear advisors,
I have significant student debt, and I think I’ve found a way my employer could help — but I still need to sell them on it.
I’m a lawyer in New York, and I recently learned about educational assistance programs. Using one of these programs would help me pay down my loans faster, and it wouldn’t cost my firm much to implement it.
My question is, what are the benefits to an employer like mine — a limited liability partnership (LLP) — for signing on to such a program? I want to persuade my firm to offer this benefit, and I need all the information I can get. Or is there something better than an EAP that I should consider?
Thanks in advance!
Sincerely,
Mired in Manhattan
And here’s what financial advisors wrote back:
