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US Student Debt Repayment Assistance by Employer

16 posts in this topic

Hello everyone,

 

I am a US citizen, bearing US student debt, living and working full-time in Berlin.

I am fortunate to have found a very good job, at a very good company, which comes with income and covers my visa problems.

I have well settled into Berlin finally, but I am dissatisfied with my financial compensation at the company.

 

I have a contract renewal meeting soon, and I will be asking for a raise, but this topic is not about "how to get a raise."

 

I know that paying an employee a higher salary means that the employer also needs to pay extra stuff in the background (insurances, social benefits, etc.)

 

If I were to propose a lower salary raise, but assistance in paying back my student loans (roughly 150 USD per month, maybe 200+ USD starting next year), would this something that a German employer would consider? I know it's a bit unorthodox but I was hoping this could be an interesting offer to make to my employer. If not, I'd be asking for the salary I think I deserve, which may not be as attractive an option.

 

I'd love your input on the matter!

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I seriously doubt your company would see paying off your loan or giving you the money as salary much differently. In fact, I think asking them to repay your US student loan would probably seem very complicated to them. How do you envision they would do that? Take over your US loan and assume the debt? Establish contact with the US entity you are repaying, and pay on your behalf? Also, Germans in general do not understand taking out massive amounts of money in loans for university degrees as is normal in the US, you might just be opening up a can of worms in which your explaining a large debt to your employer. In any case, in the unlikely event they did agree to it, the repayment would probably count as normal or bonus income, so they'd tax it as such and it would be of no benefit to them. It's better if that money goes directly to you, which means you should keep the particulars of your debt situation to yourself and ask for the raise. If you have established credit in Germany and you plan on being here for a while, then look into a local loan from a German bank, maybe you can get a better rate than your US student loan. Take the money from the German loan and pay off the loan in the US, and make monthly payments towards your loan in Germany. No need to transfer money to the US on a regular basis and deal with the fluctuating exchange rate.

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What Brockman said.

 

What's more, under German income tax law, any extra debt payment your employer made would be considered a payment in kind and would subject to tax and social welfare contributions accordingly.

 

If you think you're doing a good job and your performance assessment confirms that your superiors feel the same way, don't be afraid to ask for a raise. All they can do is say no. But asking them to do something like this would most likely be a non-starter.

 

I may be wrong, but I believe student loan payments are deductible from your taxable income, at least to an extent. Have you asked an accountant about that?

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9 hours ago, Brockman said:

If you have established credit in Germany and you plan on being here for a while, then look into a local loan from a German bank, maybe you can get a better rate than your US student loan. Take the money from the German loan and pay off the loan in the US, and make monthly payments towards your loan in Germany.

 

That is probably NOT good advice; there are certain tax breaks for paying student loan debt, whereas none for consumer loans.

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16 hours ago, anonymousGerman said:

If not, I'd be asking for the salary I think I deserve, which may not be as attractive an option.

 

Try to negotiate the best salary you can get, however, keep in mind that large salary increases are not as common in Germany as what you'd be used to in the US and wages in Berlin tend to be lower than in the rest of the country (many employers have moved positions to Berlin in order to cut costs).

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1 hour ago, engelchen said:

 

That is probably NOT good advice; there are certain tax breaks for paying student loan debt, whereas none for consumer loans.

There are certain tax breaks in Germany or in the US?

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3 hours ago, engelchen said:

 

That is probably NOT good advice; there are certain tax breaks for paying student loan debt, whereas none for consumer loans.

 

Fair point, there are tax breaks for US student loans when one files their tax declaration in the US, but as an US citizen living abroad, one is very unlikely to benefit from these tax breaks (you can reduce tax owed based on the amount of interest on the loans you paid). Even when you take into consideration a high salary, due to being credited for tax paid in Germany, a US citizen resident in Germany is unlikely to owe so much in US tax where a student loan deduction would make any dent in the amount of tax owed. 

 

In my own case, I had student loan debt at 6% (fixed from when I consolidated them, couldn't re-finance it again), and I took out a personal consumer loan in Germany at a bit over 3%, so in my case it made sense. The drawback is there was no option to suspend the repayment in case of hardship, which is possible with US student loans (although, they make this very difficult and there are a lot of penalties nowadays).

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3 hours ago, Santitas said:

There are certain tax breaks in Germany or in the US?

 

I have no idea about the US, but AFAIK the interest on student loans is sometimes tax deductible in Germany. I'm sure @PandaMunich has explained it before.

 

1 hour ago, Brockman said:

In my own case, I had student loan debt at 6% (fixed from when I consolidated them, couldn't re-finance it again), and I took out a personal consumer loan in Germany at a bit over 3%, so in my case it made sense. The drawback is there was no option to suspend the repayment in case of hardship, which is possible with US student loans (although, they make this very difficult and there are a lot of penalties nowadays).

 

I honestly don't know the German tax system well enough to determine how much the German tax deduction would be worth and whether it would have been sufficiently high to make up for the higher interest rate. Whether this would be a good option for the OP would depend on his personal circumstances. 

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16 hours ago, Brockman said:

I seriously doubt your company would see paying off your loan or giving you the money as salary much differently. In fact, I think asking them to repay your US student loan would probably seem very complicated to them. How do you envision they would do that? Take over your US loan and assume the debt? Establish contact with the US entity you are repaying, and pay on your behalf? Also, Germans in general do not understand taking out massive amounts of money in loans for university degrees as is normal in the US, you might just be opening up a can of worms in which your explaining a large debt to your employer. In any case, in the unlikely event they did agree to it, the repayment would probably count as normal or bonus income, so they'd tax it as such and it would be of no benefit to them. It's better if that money goes directly to you, which means you should keep the particulars of your debt situation to yourself and ask for the raise. If you have established credit in Germany and you plan on being here for a while, then look into a local loan from a German bank, maybe you can get a better rate than your US student loan. Take the money from the German loan and pay off the loan in the US, and make monthly payments towards your loan in Germany. No need to transfer money to the US on a regular basis and deal with the fluctuating exchange rate.

 

Thanks Brockman, I figured as much, but I'm glad to know how it is.

 

I work directly for one of the three bosses, who is very open and understanding. He knows about my US student loans.

I am able to repay debts and bills, and live a decent quality of life with my current salary. The point is that I'm being paid well below my market value, which can be backed up by the fact that the job, team, company direction have shifted since I started, but I've been able to bring out my underestimated skills to keep everything under control. My reviews are always stellar and other teams consider me a valuable asset. I also invested my own money and time in certifications that directly impact my role and the company has intentions to use my new skills. I'd also like some ROI for that.

 

I think the case is closed on the fact that "student debt assistance" is a US-specific benefit, and an unnecessary complication.

 

Thank you everyone for your input, I won't be wasting my company's time bringing it up :)

 

Side discussion though: if leveraging my market value for a raise isn't the German way, is switching companies the only way to get the pay bump I deserve?

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19 minutes ago, anonymousGerman said:

 

Thanks Brockman, I figured as much, but I'm glad to know how it is.

 

I work directly for one of the three bosses, who is very open and understanding. He knows about my US student loans.

I am able to repay debts and bills, and live a decent quality of life with my current salary. The point is that I'm being paid well below my market value, which can be backed up by the fact that the job, team, company direction have shifted since I started, but I've been able to bring out my underestimated skills to keep everything under control. My reviews are always stellar and other teams consider me a valuable asset. I also invested my own money and time in certifications that directly impact my role and the company has intentions to use my new skills. I'd also like some ROI for that.

 

I think the case is closed on the fact that "student debt assistance" is a US-specific benefit, and an unnecessary complication.

 

Thank you everyone for your input, I won't be wasting my company's time bringing it up :)

 

Side discussion though: if leveraging my market value for a raise isn't the German way, is switching companies the only way to get the pay bump I deserve?

 

People do get pay rises in Berlin. I've had a few, the employees I manage have had a few, and my wife has had a few. If you say you are close with the boss, and you can be open with this person, then you might as well kick off the conversation with him/her. What industry are you in? How long have you been at the company? How difficult would it be to replace you and ramp up a new person? These things will matter. Research online on Glassdoor and on job adverts listing salaries and try to find similar positions with salary info you can use to support your case for a pay rise. Also, check what people with your qualifications / credentials get paid on average from any info you can find online. Can you prove that you are underpaid and point to statistics that a person with a similar professional profile gets paid more than you in Germany? That's what you'll need to do.
 

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2 hours ago, engelchen said:

I have no idea about the US, but AFAIK the interest on student loans is sometimes tax deductible in Germany. I'm sure @PandaMunich has explained it before.

 

Please see this thread:

 

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23 minutes ago, PandaMunich said:

 

Please see this thread:

 

 

Thank you Panda!

 

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1 hour ago, anonymousGerman said:

if leveraging my market value for a raise isn't the German way, is switching companies the only way to get the pay bump I deserve?

 

How much more do you think you deserve? 5%? 10%? 20%? How underpaid do you feel?

 

From the way you've written your post, I got the impression that you were looking for well over 10% and most employees in Germany who are looking for an annual raise of over 10% will also look for a new employer.

 

In addition to the factors that Brockmann already mentioned, it'll also make a difference if you are with a German company with a German mentality or an international company with more mobility as well as the company size. I can probably come up with another dozen factors that may (or may not) effect the likelihood of you being able to negotiate a substantial raise.

 

1 hour ago, Brockman said:

 

People do get pay rises in Berlin. I've had a few, the employees I manage have had a few, and my wife has had a few.

 

How many people do you know who managed to negotiate an annual raise of over 10% in Berlin recently? Anyone who is not a programmer in a niche market?

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I read somewhere that the main reason men earn more money than women for the same job position, is because they ask for more money. Just ask for more money. What do you have to lose.

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15 hours ago, engelchen said:

How many people do you know who managed to negotiate an annual raise of over 10% in Berlin recently? Anyone who is not a programmer in a niche market?

I'm not in Berlin but I was located in Germany working for one of the major global IT manufacturers in Global Hardware Service (supposedly important to the company).

 

In the 8 or 9 years until I retired earlier this year I got no pay rise at all (nor did practically anyone else within the services organisation in Germany).

As my soliciter pal said - in your last years before retirement you hang on at almost any price (every month fills your pension pot).

 

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On 12/4/2018, 5:35:43, engelchen said:

 

How many people do you know who managed to negotiate an annual raise of over 10% in Berlin recently? Anyone who is not a programmer in a niche market?

 

- 3

- Yes

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