The business press has been hyping a new type of employee benefit: student-loan payments by employers on behalf of their employees. The benefit is so newsworthy that articles have dubbed it “hot” since late 2015. However, only 3 percent of businesses in a survey of 450 offer to help pay for their employees’ student debts, so it’s probably not that hot—except that some high-profile employers like accounting firms are offering it. There are two broad questions that student debtors might ask themselves regarding student-loan employee benefits: One, how much are they, and two, what might happen to them in a New York bankruptcy filing.
According to an article published in Forbes in late 2016, which discussed 10 businesses offering student-loan employee benefits, the annual employer contribution ranges from $1,000 (Chegg, an education and technology company) to $30,000 (Nvidia, another technology company). The rest clustered around $5,000 to $10,000 per year. So, if you happen to be an appealing job candidate, then you might be able to take student-loan payments as a hiring incentive. Most people who don’t have student-loan debts won’t be so lucky, and just because 3 percent of those 450 businesses offer to pay some of their workers’ student loans doesn’t mean that they account for 3 percent of the workforce. In all likelihood, very few people really luck out.
For those who do qualify, the related question is: How does it affect taxes? The answer is that if it qualifies as an “educational assistance program,” then debtors can exclude up to $5,250 of the benefit per year, but anything beyond that counts as regular income. Otherwise, the benefit is regular income. The articles insist that millennials prefer perks and bonuses to cash. Debtors exploring their employment opportunities should weigh the student-loan employment benefit against simply working at a higher-paying job. It’s possible there isn’t a benefit at all. However, Congress might change the law to allow student debtors to deduct employer payments for their education loans.
Next, what happens to a student-loan employee benefit in bankruptcy? It won’t matter in a chapter 7 case because the debtor isn’t directly receiving the income. Normally, the issue for debtors centers on whether voluntary retirement contributions are allowed in bankruptcy. New York allows reasonably necessary contributions as determined by the bankruptcy court. For employer contributions, the answer is the same: The debtor isn’t directly receiving the money and because the debtor has no control over the payment, it can’t be considered a preference that a trustee could avoid. In a chapter 13 bankruptcy, debtors may be able to ask their employers to offer them cash instead of assistance with their student loans if it can help them free up income to meet the repayment plan’s requirements.
Articles on student-loan repayment benefits can be found at Forbes, Bloomberg, and Entrepreneur.com.
If you are struggling with student loans, then chances are you don’t work for a high-end tech-sector company. Consulting with an experienced New York bankruptcy lawyer can help you assess your options, which can include a chapter 7 bankruptcy that can free up income for student loans. Chapter 13 bankruptcy can also help student loan debtors.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
