11

I work for a small company. My salary is such that I can pay off a student loan in a year or two. But I'd like to pay it off now, to avoid interest and things of that nature. Is asking the company finance officer to pay off the loan, and decrease my yearly salary by the amount of the loan, unreasonable?

  • Note: I think that I would add a contractual stipulation that I stay around for a year, so that I don't just take the money and run... – horse hair May 23 '15 at 15:25
  • 7
    There might well be tax consequences and if you can pay of the loan on a couple of years is it really worth bothering about – Pepone May 23 '15 at 15:31
  • 7
    This question could probably be better served (if rewritten to be less The Workplace oriented) in Personal Finance & Money – CGCampbell May 23 '15 at 15:50
  • 4
    Think a little further about what that "contractual stipulation" would mean. I assume you live in a country that doesn't have slavery or indentured servitude, so if you later decide to violate that contract by quitting anyway, they can't stop you. Then they're left to try to collect their money just like any creditor - they really have essentially just made you an unsecured loan. Or, what if they become unhappy with your work and want to fire you? – Nate Eldredge May 23 '15 at 19:25
  • In which country? The legal and tax setup will vary. – smci May 24 '15 at 7:46
46

No.

You'd be essentially asking your employer for a loan/advance to cover debt you incurred in good faith. Unless your employer is a bank, they're not in that business. If your employer is a bank, they would route you through the usual channels and then charge you more interest than the student loans already have.

  • 6
    If your employer is a bank, they may offer reduced rate loans to you as an employee. Refinancing could be worthwhile. Do the math; and also know what government programs and laws affect student loans where you are (there may be things like set programs for deferred interest if your income drops; on the other hand there may be better bankruptcy protection for ordinary bank loans compared to student loans). – rakslice May 23 '15 at 21:11
  • Ultimately an employer will most likely think such a request is weird and distasteful, unless they have some existing program in place for such a request. – Mark Rogers May 24 '15 at 2:02
  • @MarkRogers: I've seen some small companies go to incredible lengths for certain employees. Including paying off gambling debts, credit cards, speeding tickets, bailing them out of jail, providing housing, etc. Is it dumb? absolutely, but it always boiled down to whether the owners thought it was worth it or not. – NotMe May 26 '15 at 22:04
13

It's always reasonable to ask; sometimes it's not reasonable to expect a positive answer :-)

Fact is, if it is possible for your employer to give you some financial or other advantage without cost to the employer, then any clever employer will do it. (Because the employer wants to give you as many benefits as they can so you don't look for employment elsewhere; the employer just doesn't like the cost involved). A $100 raise costs the employer $100 (possibly more depending on the country). Doing something that gives you a $100 financial advantage without cost to the employer costs nothing. Guess what the employer prefers. Of course "cost" is also the cost finding out how to do this, how to stay within the laws, etc. etc. etc.

This may fail however if the tax office in your country says that the employer paying back your student loan is the same as giving you income, so it needs to be fully taxed. And it may very well be that paying your student loan and not telling the tax office would be criminal. In which case the answer will be "no".

5

No, it's not reasonable.

First of all, what you're considering is a roundabout way of making yourself unfireable. If they've paid you in advance and they're only recovering that value by having you work for them at a reduced rate, they're stuck with keeping you working for them to even have a hope of breaking even on the deal.

Second, you're making it difficult for yourself to quit/walk away/seek new employment, since your employer would be out a lot of money if you do and they'd probably want to be compensated, which you might not be prepared to do.

Third, it's utterly stupid as a lender to refinance student loan debt (which is what they would be doing) without careful risk assessment, since the original debt could not be discharged by bankruptcy but the refinanced debt may be able to.

Fourth, if there's any kind of formal debt which you're paying off by working, this is possibly indentured servitude, which is illegal at least in the US by the 13th Amendment.

  • I really think it's a bit of a reach to call this "indentured servitude". – Lightness Races with Monica May 24 '15 at 16:17
  • In a sense it's a "stretch", yes, but a lot of the reasons this is a bad idea are the same reasons that indentured servitude was a horrible idea. – R.. May 24 '15 at 17:54
2

I have worked for companies that allowed employees to purchase computers via a payroll deduction. This was in the lat 1980' and early 1990's when the relative prices of computer was a significant portion of a typical salary. The catch was that there was interest component. They gave you 2,000 for a computer and you spent 52 paychecks paying it back with interest. The rate was competitive compared to what a bank would offer. Unfortunately I don't remember the tax implications because I never seriously considered it.

If your employer did pay off a lump sum for the student loan they would likely require you to pay it back via payroll deduction. They will have a provision to recapture the outstanding balance if you leave the company. This is typical if you receive money to pay for a move when you join the company, or for education benefits.

If they don't have these types of programs it may be hard to convince them to start with a student loan program, because they will need to have their corporate lawyer draft the documents to protect their money.

It may not save you a lot of money. or any money at all, because of the interest portion, in addition to the tax issues.

2

In the U.S. some public service jobs will forgive your student after a certain period of service. These jobs are usually not the highest paying, but if its in your field it might be worth looking at.

Realistically, if you can pay off the debt in a few years, I wouldn't bother asking the company to do it. Most of the jobs that offer loan forgiveness slowly forgive the loan over 10 years. You won't be paying that much in interest and fees, and any fancy financial magic like consolidation, is likely to generate more fees that you'd save given a 2 year payback window.

Remember, startups usually are running off venture capital, not revenue, so generally the money is all spoken for. Any large 1 time payment would probably make the venture capital backed board not too happy.

If its really bothering you, a loan from parents or other family members would probably be the best option

  • About federal loan forgiveness: that takes 10 years of payments, which is about the same that most loan payoff plans take. That's pretty much useless as far as I can see. About parents -- no, I'm not in that boat. I just want to have that debt gone as soon as possible. You made a really good point about startups and their funding, thanks! – horse hair May 23 '15 at 20:49
1

Considering, you have mentioned that you are working in a small firm, i believe you should definitely give it a try, as policies and procedures may not be as stringent as in large companies.

Also i would encourage you to ask around and find any precedence that could help support your request. If the firm has shown an open attitude to such/similar request from another employee, it could help your position.

-1

When negotiating salaries, employers are more likely to give you one time bonuses than pay increases because its a one time payment instead of ongoing. You might ask for a signing bonus (how much specifically you could ask for varies with a lot of parameters). That'd be a way to get what you want in a more socially acceptable way.

  • 1
    If only we could turn back the hands of time – horse hair May 23 '15 at 20:51
  • True, misread your situation. Never hurts to look around though, unless you are super happy where you are at. Best way to get raises and promotions is to go somewhere else in my experience (: – Alan Wolfe May 23 '15 at 21:09

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.