Here are the top three reasons you do not want to process employee minimum monthly payments:
(1) Your employees almost certainly have a bank and have likely set-up direct debit for their minimum monthly payment. Asking them to switch this adds complexity to your program and likely has a negative effect on program engagement.
(2) Loan servicers incentivize loan holders to set-up direct debit by offering a discount when they do. This is not extended to payroll deductions. Bottom line is that it is not in your employees’s best interest to move away from direct debit because they lose out on the 25 bps discount.
(3) What if you don’t make the minimum payment on time? Are you responsible for penalties and late fees that accrue to your employees’ account? If they were working towards the 10 year requirement for loan forgiveness, you may cause the clock to start over! Any number of things could cause a missed payment from your company changing its payroll cycle to an employee going on leave.
Our recommendation is to keep it simple – tell employees to continue doing exactly what they do today to make their minimum payment and focus your program on employer contributions that will get them out of debt faster.
Have other questions about student loan assistance as an employee benefit? Schedule time with our client services team today.