Exchanging PTO for Debt Repayment Assistance

If you are someone involved in the payroll industry, you might find it fascinating to see all of the creative benefits employers are offering to entice recruits. Benefits like unlimited paid time off (PTO) would never have been offered a decade ago. But today, a whole range of new benefits is cropping up. Among them is debt repayment assistance.

Some companies are now offering new hires financial assistance to help repay their student loans. The benefit is offered right alongside health insurance, dental and vision plans, and life insurance. It is considered a cash benefit taxable under federal and state law.

How does it work? That depends on how the benefit is structured. Companies have different ways of doing it. One hospital in New York State has decided to offer it by allowing employees to exchange unused PTO for cash to pay down their student loans.

Paying Student Debt with PTO

BenefitMall, a Dallas company that provides payroll and benefits administration services, says that companies constantly have to walk that fine line between how employees feel about their benefits packages and actual cost of said benefits. So any time a company can add an extra benefit, it’s a good thing. That’s what Montefiore St. Luke’s Cornwall has done with their student loan benefit.

The hospital has campuses in Newburgh and Cornwall,  both of which employ medical professionals trying to get their student debt paid off. So to help, the company has established a loan repayment program that doesn’t cost them anything extra.

Eligible employees can take advantage of the benefit by converting unused PTO into a contribution the employer makes toward paying off student loans. They can convert between 30 and 75 hours of unused time. The maximum contribution resulting from the conversion is $5,000 annually.

That may not seem like much but reducing the principal of any loan by $5,000 per year substantially cuts down on the total cost of borrowing by drastically reducing interest paid. A loan that would otherwise take 10 to 20 years to pay off could be settled in significantly less time.

A No-Cost Benefit

Converting PTO to student debt repayment obviously benefits workers by giving them yet another avenue to pay off what they owe without putting additional stress on their budgets. The employer benefits by being able to offer a new benefit at no additional cost. For the employer, it is the best of both worlds.

Any additional benefits employers can offer gives them an advantage in recruiting and hiring. When salaries are equal, new hires will typically go with the company that offers the better benefits package. Thus, offering some kind of program to help pay down student loans is a big winner. Being able to offer it at no additional cost is like icing on the proverbial cake.

Not Taking Time off

If there is any downside to the benefit it is the risk that some employees will not take any time off. Rather than staying home due to sickness, they might come to work in hopes of converting unused sick time. Rather than taking a much-needed vacation over the summer, they might forgo their vacation in order to pay off student loans.

Paying off student loans as quickly as possible is obviously a good idea. But so is taking time off from work every now and again. Everyone needs a break once in a while. And if you’re sick, coming to work only risks your coworkers’ health.

Converting unused PTO to student loan debt reduction seems like a good idea. Perhaps that’s why more companies are offering it.