Highway Benefits, which uses modernized benefits to increase employee retention and financial wellness, announced today that it has closed a $3.1 million seed round led by XYZ Venture Capital, with angel investor Roger Ferguson Jr. participating.
The company is concentrating on scaling its platform to address the $1.8 trillion in student loan debt that burdens 45 million borrowers with an average loan balance of $38,000 and $400 monthly payments. Highway also announced its integration with Rippling and availability in the company’s app store, making it even easier for Rippling companies to offer student loan repayment benefits.
Mick MacLaverty, Co-Founder & CEO of an undisclosed company, stated that this year is a crucial one for student loans, as loan repayment is expected to resume for the first time in three years. He emphasized that borrowers are not prepared for this and that employers can play an important role in the financial wellness of their employees, as 27% of borrowers admitted that one-third of their income will go towards loan repayment.
The CARES Act, which was signed into law in March 2020, allows employers to make tax-free contributions of up to $5,250 per employee per year to an employee’s federal and private student loans. Contributions made by employers are exempt from Social Security and Medicare payroll taxes.
After income and payroll taxes, an employee receiving the same annual salary increase would typically receive less than $4,000 in take-home pay. Employees who receive student loan repayment as a benefit pay off their current loans faster and save money by lowering their interest rate.
MacLaverty and Cory Micheel founded Highway Benefits in 2021 while both were graduate students at UCLA’s Anderson School of Management. Having firsthand experience with the burden of student loans, MacLaverty and Micheel sought to create a viable solution to this crisis by focusing on student loan repayment as a benefit.
Employers can use Highway’s employee benefits platform to make tax-free contributions directly to their employees’ student loans. Employers can create and manage fully customizable contribution and eligibility rules, while Highway’s automated system verifies benefit eligibility and qualified loans for participating employees. Highway enables employees to quickly connect their student loans through integrations with all loan servicers, allowing them to start saving right away.
The CARES Act, which was signed into law in March 2020, allows employers to make tax-free contributions of up to $5,250 per employee per year to an employee’s federal and private student loans. Contributions made by employers are exempt from Social Security and Medicare payroll taxes. After income and payroll taxes, an employee receiving the same annual salary increase would typically receive less than $4,000 in take-home pay. Employees who receive student loan repayment as a benefit pay off their current loans faster and save money by lowering their interest rate.
