Companies offering student loan assistance or tuition reimbursement are sure to attract talent
California is slated to launch Middle Class Scholarship 2.0, a “debt-free” program for California State University and University of California students, this summer.
California Gov. Gavin Newsom and fellow lawmakers have vowed to allocate $632 million for the program in the state’s budget this June. An anticipated 246,000 CSU students and 114,000 UC students will receive the aid to help finance their educations starting in the fall. That hefty sum is just a portion of the program’s total cost, totaling $2.6 billion, EdSource reported.
Grants will range between $1,000 and just over $3,000 on average in the program’s first phase. Across both schools, students who borrowed federal loans and graduated in 2020 typically took out about $15,000, according to a CalMatters analysis of federal data.
Read more: How to build competitive benefits packages
Roughly 43 million Americans have federal student loan debt, according to the Education Data Initiative. Even before the pandemic, the United States’ outstanding student loan debt balance exceeded $1.7 trillion, becoming a larger burden to households than even credit card debt. Two years after the federal government paused student loan payments and dropped the interest rate to 0%, as many as half of people with such debt may now be at increased risk of falling behind, according to a recent report by the Government Accountability Office.
Earlier this month, President Joe Biden extended the pause on federal student loan payments through Aug. 31. It’s the fifth extension since the moratorium took effect in March 2020 because of the COVID-19 pandemic. This time, though, borrowers are contending with historic inflation and escalating gas prices.
As part of his 2020 campaign, Biden vowed to alleviate student loan debt if elected, even tweeting that the government should forgive a minimum of $10,000 per person of federal student loans, as initially proposed by U.S. Senator Elizabeth Warren. “Young people and other student debt holders bore the brunt of the last crisis. It shouldn't happen again,” Biden tweeted on March 22, 2020.
Additionally, we should forgive a minimum of $10,000/person of federal student loans, as proposed by Senator Warren and colleagues. Young people and other student debt holders bore the brunt of the last crisis. It shouldn't happen again.
— Joe Biden (@JoeBiden) March 22, 2020
Well, he’s been in office for over a year, and no such action has been taken. As a matter of fact, the Biden administration further extended the pause on student loan payments in December only after increased pressure from politicians in his own party, as well as the public. It looked even bleaker for borrowers after Biden didn’t address student loan debt at all during his first State of the Union in March.
Without the federal government to rely on, employees are seeking relief from the private sector.
Tuition reimbursements are on the rise, as companies compete for talent during the Great Resignation. Employees have been leaving their positions for greener pastures, demanding higher salaries, better working conditions, improved work/life balance and more opportunities to advance their career. With the scales tipped in favor of labor, employers are having to increase their compensation and benefits packages beyond the traditional healthcare, dental, vision and 401(k) offers. Tuition reimbursement, especially for millennials and Gen Z, can be the difference maker.
Through 2025, employers can continue to make contributions of up to $5,250 per employee annually toward eligible education expenses without raising the employee's gross taxable income under Section 127 of the Internal Revenue Code. In February, Herschend Enterprises, which oversees Dolly Parton’s theme park and resort Dollywood, announced that it will cover the full cost of tuition, fees and books for employees who want to further their education. Companies with similar plans include Amazon, Walmart, Starbucks and Newport Beach, CA-based Chipotle.