Student Loans: The Big Payback

With student-loan payments set to resume on October 1, employers are debating how they can provide younger workers with assistance—or if they even should.

Student loans are a hot topic once again—not just for recent graduates and their parents, but also for human-resources executives, benefit-plan administrators, and other corporate leaders.

After a three-year government reprieve due to the pandemic, borrowers will have to start repaying their student loans again beginning on October 1. While economists are concerned about the impact of repayments on consumer spending, employers are debating how, and at what level, they can provide younger workers with student-loan relief—or if they even should.

“A big portion of student-loan borrowers are not prepared to resume payments,” says Brian Bloom, vice president of global benefits and mobility operations at Korn Ferry. He cites factors like high inflation, credit-card debt, travel, new homes, and other lifestyle changes due to the pandemic and shift to remote work that have limited workers’ ability to pay back loans. 

Americans owe about $1.6 trillion in outstanding federal student-loan debt, or roughly $37,000 per borrower. But less than half of the 43 million people carrying federal student loans are actively paying them back. During the pandemic, the government enacted legislation that allowed employers to offer employees up to $5,250 annually in tax-free repayment benefits through 2025. But even before the pandemic, firms were exploring offering student-loan assistance as a benefit to increase recruiting and retention. According to the Employee Benefit Research Institute, 17% of employers currently offer student-loan debt assistance, and another 31% plan to do so. “It is an emerging benefits trend that more organizations will likely offer,” says Tom McMullen, a leader in the North America Total Rewards practice at Korn Ferry.

One factor behind the benefit is employee retention. More than 60% of employed adults in the US with student loans would consider switching companies to gain repayment assistance. Similarly, 70% of college students in a recent poll say their loan debt will influence what kind of job they take after graduation. “It’s a top-of-mind issue for many employees,” says Bloom.

Such offers, experts say, do run the risk of alienating large portions of the workforce, creating cultural issues among different demographic groups. “Offering this kind of benefit could generate resentment among those who aren’t eligible for it,” says McMullen. After all, there are lots of other forms of debt—medical bills, elder-care costs—that affect workers who don’t receive any work-related assistance. As McMullen notes, while offering student-loan assistance may help with recruiting younger workers, it could also cost companies by driving out older employees who find the benefit inequitable.

There are other ways firms can help employees with student debt. Financial-education tools to help with budgeting, refinancing applications, and accessing resources are among the most common and popular, for instance. Beginning in 2025, companies can begin offering 401(k) student-loan matches, whereby employees who are actively repaying their debt can receive matching funds from their employers into their retirement plan. Many companies are also offering signing bonuses earmarked for loan repayment, access to low-interest or interest-free educational loans, debt-consolidation services, and more. “The conversation around student-loan repayment assistance has been quiet for the last few years,” says Bloom, “but it is going to get a lot louder now.”


For more information, contact Korn Ferry’s Total Rewards practice.