Is It A Good Idea To Take A Job For Student Loan Assistance?

June 04, 2018

It is clearly graduation season — the proud parents, gowns, and decorated mortar boards are filling my social media feeds. My favorite part of the season are the inspiring commencement addresses. While the ceremonies are filled with optimism about the future, many of this group of graduates will walk away from the festivities with a burden of student loan debt. As many as 7 out 10 college graduates have student loan debt with an average balance of almost $29,000.

Employers and some government agencies recognize this burden, so there has been a rise in the variety of programs that offer everything from financial assistance to loan forgiveness in order to help graduates grapple with this debt. As you or your child venture out into the “real world” of working, paying taxes and paying your bills, you may be wondering if any of these programs could be of benefit.

Programs that help with student loan debt

Public service loan forgiveness programs

Many people have heard of these programs, although not many are clear on what it is or whether it can help them. The most widely available program has to do with working for certain organizations. If you work for any of the following types of organization, you may qualify for Public Service Loan Forgiveness or PSLF:

• Government organizations at any level (federal, state, local, or tribal)
• Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code, such as a charity or certain hospitals
• Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services
• Serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF Program

How to qualify for PSLF

In order to qualify, your loan must meet certain requirements and you have to remain current on your payments. These programs also require 120 months of employment with a qualifying employer (aka 10 years total – you can switch jobs, but you need 120 months total with qualifying employers). It’s a good idea to certify that you meet the requirements as soon as possible (and re-certify about once a year) to make sure you’re still on track for the 120 months.

Other options besides the federal program

The federal government may not be your only resource. Local governments also offer loan forgiveness programs for professionals they deem to be a need in their region. For instance, my home state of Tennessee has programs for Math and Science teachers and graduate school for nurses. Many inner-city public school jobs qualify with slightly different requirements than the federal program. These programs can sometimes even give you the option to work for a for-profit organization, so check around to see if your job qualifies.

Employee benefit assistance programs

If working in the public sector isn’t for you, you may be able to find a job with a company that offers some type of student loan assistance as well. SHRM reports that 4% of all employers offer some type of student loan assistance program these days —  the percentage jumps to 8% for larger companies and is expected to rise according the CFPB.

How it works

Like the PSLF programs, many employers are looking for a certain level of tenure with their organization before the assistance truly kicks in. In most instances we see today, employers are offering qualifying employees matching payments on their loans up to a certain amount. In some cases, employers also provide assistance with refinancing and setting up payment plans for qualifying employees.

Check with your HR representative to see if your company offers student loan assistance and to see if you qualify.

Should I pursue a job with these benefits?

Getting help with your loans is definitely one thing to put in the “Pro” column when considering a job opportunity, but there are other things to consider as well. Ask yourself the following questions to help decide.

Is this the right profession for you?

We all know people who picked their profession just for the money — sometimes it works out, but as some of my second-career financial planner colleagues will tell you, it’s often not worth it. You will spend approximately 90,000 hours of your life at your job. By some estimations that is 1/3 of your waking hours. Work is so much easier when you enjoy it.

A lot of the jobs that will help you qualify for PSLF are rewarding if your personality is the right fit, but they can also be very demanding (I really don’t know how teachers do it — it takes a special person!). Keep in mind that to reap the loan award you will need to stick with it for 10 years – that’s a long time to stay in a job you hate! Similar rules also apply for other loan assistance programs.

One other consideration is that many of the jobs that qualify are lower paying, which means you may have some of your student loans forgiven, but you may also be giving up earning power throughout those years we well. As much as you would like the benefit of clearing up your student loan debt, be sure you are doing something you find fulfilling to make it worth it.

Are you clear on the tax ramifications of loan assistance?

Loan forgiveness: The notion of having your student loan forgiven is appealing, but there may be tax repercussions to consider. At this point the PSLF program does NOT treat the amount forgiven as taxable income, but other programs may. One of my colleagues had a call from a client that ran into this issue and this blog explains how she handled it.

Payment assistance: If your employer is making any payments toward your loans through a benefits program, then those payments are considered to be taxable income and will be included in your W-2. (Know that you can still deduct the interest paid on any portion of the loan your employer paid, as long as you’re eligible for the deduction)

How do the rest of the benefits of the job add up?

If you are comparing job offers and one offers loan assistance, does that make it an open and shut case? Not necessarily! Be sure to compare all the financial aspects of each offer. While one company may offer student loan assistance, the other may offer a lower cost healthcare plan that could balance out the difference in cash flow to you. Obviously, salary is a major part of the calculation but also consider comparing things like 401k and HSA contributions. Calculate how much you would save if the loan was paid off by forgiveness and compare that to the cost of how much you may miss in other perks.

When you don’t have student loan assistance available

If the career opportunity or overall benefit package is better elsewhere, then it may make sense to attack the student loan debt the traditional way. It is oftentimes helpful to have someone walk you through the different options or help with a student loan payment strategy. Your employer may offer a financial wellness benefit in which someone can walk you through the process of weighing the value of each opportunity.