Student Debt Crisis and LRAPs: How to Get A Job That Helps Pay Off Your Student Loans

Amid debate over government-funded student loan forgiveness, some employers are stepping up to share the debt burden as a way to attract and keep high caliber employees. As part of a benefits package, loan repayment assistant programs (LRAPs) make a lot of sense and should be more common.

In most cases, it doesn’t make sense to start saving for retirement until after student loans are paid off in full. Because the returns on 401(k)s and other retirement funds aren’t generally much higher than the interest on student loans (if at all), it’s much more beneficial to have an employer put money toward student debt than toward a retirement account.

LRAPs are most common in public service jobs where employers are competing against much higher paying private sector jobs — like a public defender competing with a private law firm. LRAPs are a great way for these public service employers to attract and retain highly qualified people. This additional competitive edge increases the quality of public service overall, as well as making it possible for people who might want to work in the public sector, but opt for something else because of a huge debt burden.

LRAPs are different from Public Service Loan Forgiveness, a federal program under which the remaining balance of federal student loans is forgiven after 10 years of on-time payment and full-time work in a public service job. With LRAPs, an employer provides a stipend each month to help cover the cost of loan payments as part of a benefits package, either in addition to or instead of a 401(k) or pension plan.

Some employers in the private sector will help cover tuition expenses as well, sometimes in full, right away, through what are known as tuition reimbursement programs. This is a sweet deal if you can get it, but is obviously a much bigger cost burden for the employer.

LRAPs, on the other hand, can be small, manageable payments. They can also be offset by decreased contributions to retirement programs so that the employer doesn’t pay any more than they would under a traditional benefits package but employees can put the money where it’s most needed.

It’s not ideal to eliminate or greatly decrease retirement savings for people struggling to pay off student loans, but, until the cost of tuition is brought back down to a reasonable level, LRAPs are more needed than 401(k)s. Ideally, with the help of LRAPs, people would pay down their student debts early enough in life to start saving for retirement at a reasonable age, debt free. Hopefully, they’ll catch on and spread beyond public service jobs.