For many young professionals, it is a hard reality: a student debt that continues to impact your financial situation for years. According to figures from the CBS, in 2023 approximately 45% of students in higher education have a student loan, with an average debt of €11,800 for people under 25 years old (source: Dutch Youth Institute).
To provide support, we are now making it possible to pay off part of the student debt in a tax-favorable way through the Individual Choice Budget (IKB). This means that part of the gross salary can be used to pay off the debt at DUO, resulting in an immediate net benefit. Depending on the tax bracket, this benefit can amount to 49.5% of the repaid amount (source: NRC).
How does it work?
Repaying by the employee: The employee repays (part of) the student debt themselves at DUO and then claims this amount within the Work-related Costs Scheme (WKR) via the IKB.
Setting a maximum amount: As an employer, you determine the maximum amount that an employee can allocate per year for repaying the student debt, for example, aligned with tax possibilities or an internal budget.
Flexible exchange: Within the established limits, employees can decide which amount they want to exchange and thus optimally benefit from the tax advantage.
Simple administration: Via the Alleo portal, changes can be easily downloaded and directly processed in the payroll system, allowing for a quick and efficient exchange without additional administrative burdens.
Why offer this arrangement as an employer?
Offering a tax-favorable arrangement for student debt repayment contributes to the financial health and job satisfaction of employees. Especially for young professionals, this can be an attractive secondary employment benefit, distinguishing you as an employer in the labor market. Moreover, the arrangement is budget-neutral and requires no additional investment from the employer, while employees benefit directly.
Important considerations
Work-related Costs Scheme (WKR): The exchange of gross salary for student debt repayment falls within the free space of the WKR. Employers must take into account that this space may be limited, especially in smaller organizations (source: Jongbloed Fiscal Lawyers).
Reasonableness test: Ensure that the scheme fits within the tax norms and that the amount to be exchanged is reasonable in the market.
With this new functionality, Alleo helps employers offer flexible benefits and supports employees in repaying their student debt quickly and favorably.
Want to know more?
Contact us for a demo or to discuss how this arrangement can be implemented in your organization!
