
Apply HN: 401L before 401K (Education loan) - vs2370
Problem - Broken education loans http:&#x2F;&#x2F;www.wsj.com&#x2F;articles&#x2F;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&#x27;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.
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bestattack
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?)

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.

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kjksf
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.

How much of a pain it is for people to make those payments. Is it manual
process now?

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.

Presumably this would have to integrate with payroll systems. Which systems
can you already integrate with?

Wouldn't employee be reluctant to disclose his loan repayment status? That
doesn't sound like something employer should know.

Did you study potential legal ramifications of being intermediary between a
person and loan provider?

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vs2370
Thanks for your comment, Employers will do a percentage match towards the
repayment. Also pay for the SaaS platform.

Currently a lot of students do not automate it because of not having the
minimum balance on the due date. One more problem that it does solve just like
401k is to mandate some financial discipline. Like 401k they can obviously
skip few months given that they will be fined by their bank.

Regarding benefits for employers - One is a benefit to attract talent. Some
companies like deloitte pay off your one semester fee if were an intern who
got and accepted a full time offer. Other employers have plans to pay towards
your continuing education. I dont think this will add much extra cost to
employer but yes there will def be some friction to onboard first few
companies. But if Google is in, Facebook will not miss it

Either zenefits or adp. Right now none.

Yes sharing repayment status might be tricky. Good point. But employer doesn't
have to see the repayment status though. The platform can automatically stop
or notify the employee once the repayment is done.

I sent an email to few people who manage education loans at banks.

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CaliforniaKarl
The first thing that came to my mind was that this would be a modified form a
wage garnishing, but with employer contributions included.

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.

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?

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.

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vs2370
No cuts. Ethically I dont think it is great to eat commissions out of
repayments towards loan. I think it would work more like how gusto or small
improvements works for ex. Another enterprise SaaS tool with per employee
charge.

Also there might be other revenue streams. For example refinancing options or
getting into loan market itself and marketing a loan that is in terms with
employers, etc.

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vs2370
Also no plans on any lobbying :)

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brudgers
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?

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treeform
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?

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?

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vs2370
In some countries it does. Just like how companies get tax credits on their
spendings on free food, perks etc this might also be covered. Good point, I
will research on it.

All my employers have had great 401k match(upto 6%) and it is a key factor to
attract talent. This can be a a great way to not only attract talent but also
retain them for the period of their repayment of loan. And then similar
programs can be expanded to mortgage, auto, child related loans, etc.

I think 401 k makes sense when you are first out of your debts. Planning for
future retirement funds while being in debt currently does not sound very
right

