Tuition Reimbursement vs. Student Loan Repayment: Which Delivers Better ROI?

For years, nonprofit hospitals have offered tuition reimbursement as a way to attract and retain top talent. The logic is simple: invest in employees’ education, and they’ll invest their skills back into the organization. But with rising student debt and shifting workforce expectations, is tuition reimbursement still the best investment?

Many hospitals are now exploring student loan repayment assistance as a more effective strategy for recruitment and retention—one that delivers a stronger return on investment (ROI). Here’s why CFOs should take a closer look.

The Cost of Tuition Reimbursement vs. Student Loan Repayment

Tuition reimbursement programs can be costly and administratively complex. Hospitals typically reimburse employees for courses after they’ve been completed, often with restrictions on eligible schools or fields of study. This creates several challenges:

• Delayed benefit realization – Employees must pay upfront and wait for reimbursement, which may discourage participation.
• Limited immediate impact – Only employees who are pursuing further education benefit, excluding those with existing debt.
• Potential for turnover – There’s no guarantee employees will stay after receiving reimbursement, particularly if no service commitment is required.

In contrast, student loan repayment assistance provides immediate financial relief, which is especially attractive to younger employees and those already carrying student debt. This option can be structured to provide predictable costs and stronger retention incentives—key factors in maximizing ROI.

Which Program Attracts and Retains Talent More Effectively?

1. Addressing Workforce Needs

According to the Association of American Medical Colleges (AAMC), 73% of medical and health sciences graduates leave school with student debt. Nurses, physician assistants, and other healthcare professionals often delay major life decisions—such as homeownership or further education—because of loan burdens. Offering student loan repayment can directly support employees’ financial well-being, making your hospital more competitive in attracting top talent.

2. Retention and Productivity Benefits

Retention rates improve when employees feel financially secure. A 2023 survey by the Society for Human Resource Management (SHRM) found that 86% of employees would stay with an employer offering student loan repayment benefits. By reducing financial stress, hospitals can enhance productivity, morale, and long-term commitment.

3. Cost Predictability and Simplicity

Unlike tuition reimbursement, which fluctuates based on educational choices and course loads, student loan repayment assistance is predictable—it provides set monthly contributions toward an employee’s existing loans. This makes it easier for CFOs to forecast budgets and measure impact.

Tax Benefits and Policy Support

Under the CARES Act, employers can provide up to $5,250 annually in tax-free student loan repayment assistance, a provision extended through 2025 under the Consolidated Appropriations Act. This creates a tax-efficient way to support employees while keeping costs controlled. Tuition reimbursement offers similar tax benefits, but the delayed impact and administrative burden make it a less agile tool in today’s workforce climate.

The Bottom Line: A More Strategic Investment

While tuition reimbursement has long been a staple in hospital benefits, student loan repayment assistance is emerging as a higher-ROI alternative—one that is simpler, more cost-effective, and better aligned with the financial realities of today’s healthcare workforce.

CFOs looking to future-proof their hospital’s talent strategy should consider whether reallocating funds from tuition reimbursement to student loan repayment could yield stronger employee engagement, improved retention, and a more competitive hiring advantage.

Is your hospital system evaluating student loan repayment assistance? PeopleJoy partners with nonprofit hospitals to design custom, compliant, and high-impact student loan benefits that attract and retain top talent. Learn more today.

Sources

1. Association of American Medical Colleges (AAMC): Medical Student Education: Debt, Costs, and Loan Repayment Fact Card
   
   
2. Society for Human Resource Management (SHRM): 2023 Employee Benefits Survey
   
   
3. Internal Revenue Service (IRS): Employer-Provided Educational Assistance Programs

Please note that the IRS link provided is a general reference to employer-provided educational assistance programs. For the most current and specific information, it's advisable to consult the IRS website directly or speak with a tax professional.