Problem - Broken education loans http://www.wsj.com/articles/more-than-40-of-student-borrowers-arent-making-payments-1459971348?mod=e2fb<p>401L is a platform that enables employers to contribute certain agreed upon percentage towards its employee's(typically a new college hire) education loan repayment<p>How it works
- Employer on boards the new employee into the system
- Employee then choses a certain percentage of their salary to be paid towards their loan.
- Employer fills in their contribution details( 1%, 2%, etc)
- Every pay check date, the platform makes a timely payment to the loan.
To evaluate this idea further, I'd want to know how fast (how much faster) the loan will be paid off given various salary percentages. Is this a good way to pay off a loan? (Do I even want to pay off the loan faster?)<p>As an employer, you have to convince me to offer it as a benefit, which means convincing me that my employees will love it, that it will help to attract and retain great people. This makes me worried because it is one of those "vitamin, not painkiller" problems - and it's a niche one at that - I am worried that people don't want it and it will be hard to get into people's hands.
Why involve employers in the loop at all? If automation is the goal, you could (presumably, not sure if it's actually legally/technically possible) connect someone's bank account to loan repayment.<p>How much of a pain it is for people to make those payments. Is it manual process now?<p>What's in it for the employer? Taking a significant headache of managing such system on behalf of the employee. There are probably legal ramifications for this scheme.<p>Presumably this would have to integrate with payroll systems. Which systems can you already integrate with?<p>Wouldn't employee be reluctant to disclose his loan repayment status? That doesn't sound like something employer should know.<p>Did you study potential legal ramifications of being intermediary between a person and loan provider?
The first thing that came to my mind was that this would be a modified form a wage garnishing, but with employer contributions included.<p>Do you have plans to include lobbying as a budget item? Just searching around, it seems that "Make student-loan repayment pre-taxable" has been brought up in the US before.<p>I'm curious: Where would you expect to take your cut, and how? Would it be a flat fee per enrolled employee, or maybe a % of $ being contributed?<p>If something like this did become a reality, I would expect it to eventually be bought by a benefits-handling institution like Fidelity or CREF, something who already does tight interaction with corporate payroll platforms.
In the US, 401k's are enabled by legislation that provides tax deferred status for the income and its growth. Without enabling tax legislation wouldn't this sort of benefit be taxed as ordinary income? Is so, what advantage would this provide to employees and employers over cash and the standard student loan interest deductions?
This could be cool if the "401L" would have the proper tax incentives around it as well. I think there is very small tax incentive to repay student loans now. How does that work exactly?<p>Now if Employers add matching as a benefit that could be a cool perk. It seems like Employers stopped doing 401K matching lately. Did they stop and why?