What to Know About Your SLRA Program
A Student Loan Repayment Assistance (SLRA) program is way for employers to help their employees by contributing to their student loan repayments. In an increasingly competitive business environment, and with student loan debt rising nationally, SLRA programs are a powerful tool to attract and retain new talent. This benefit is a great addition to other perks like better health and dental insurance, generous vacation days, 401k programs and company gyms.
Student Loan Repayment Assistance (SLRA) Programs
Student loans have exceeded $1.56 trillion and are the second largest debt category for Americans, second only to mortgages. Many companies are finding that offering an SLRA program can be an effective tool for recruiting college graduates. In 2015, only 3% of employers offered such a benefit to their employees, according to SHRM. By 2019, that number had more than doubled to 8% and is expected to rise to more than 30% by 2021.
One of the provisions in the March 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed employers, through Section 127 of the Internal Revenue Code, to make contributions of up to $5,250 per employee toward specified education expenses without impacting the employee’s taxable income. The provision was originally scheduled to run only through the end of 2020. Then, in December, President Trump signed the Consolidated Appropriations Act (CAA), which extended this provision through 2025.
However, in order to take full advantage of the provision, employers will need to create a formal educational assistance program that incorporates certain key features:
- Written Documentation – employers must provide a formal written explanation of the elibility, benefits, and rules of operation of their SLRA program.
- Notice – employers must make sure eligible employees are provided notification of the program availability and terms.
- Eligibility – employers may limit eligibility in specific ways such as job title or location, but restrictions must not discriminate in favor of highly compensated employees (HCEs). To avoid discrimination issues, the program should either make all employees eligible or exclude all HCEs.
- Substantiation – employers must require employees who receive benefits under the program to validate their expenses.
- No Cash in Lieu of Benefits – employers cannot offer employees a choice between educational assistance or wages.
- Claw-Back Provision – employers may include a “clawback provision” to seek repayment from employees who do not meet establish requirements, such as a minimum term of employment, etc.
When deciding whether or not to adopt an SLRA program, businesses should consider all of the benefits and costs.
Reducing Turnover
High employee turnover is a concern for most businesses. The cost of losing an employee has been estimated at anywhere from 16% of their salary to more than 200% for highly skilled positions.
The Bureau of Labor and Statistics looked at job tenure based on age. They found that workers between the ages of 55 and 64 had a median job tenure of 10 years while those between 25 and 34 had less three.
Moreover, a Gallup survey found that 60% of currently-employed millennials said they were open to different job opportunities and 21% of them claimed to have just changed jobs within the past year.
One important benefit of an SLRA program for employers is reducing turnover by tying the perk to an employment commitment from their new hires.
Cost of Administration
Whether you handle the administration of your SLRA program in house or through a third party, it is important to weigh the costs against the benefits. Your leadership team will need to determine how much funding they are going to commit to the program. They will also need to determine how they will administer any claw-back provision if an employee fails to uphold his or her obligations.
Be aware of the hidden cost of missed opportunities. As SLRA programs become more popular, it will be impossible to calculate the number of quality employees who may never even apply at your company if you don’t offer the benefit.
The extended SLRA provision of the CARES Act stands a good chance of becoming permanent and even expanded. This will have a considerable impact on what types of SLRA programs employers offer and how they will be administered. In this dynamic environment, HR professionals should be alert for new or adapted legislation.
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