Student Loan Forgiveness Helps Employees and Employers

Health Savings EducationStudent loan forgiveness sounds too good to be true.  But, what does student loan forgiveness mean for employers?  It could be good news for employer benefit programs, and financial wellness.  In any case, it’s likely to prompt employers to consider making changes to their benefits programs.  This should be done with the guidance of a benefits advisor or consultant.  Employees who find themselves unburdened by student debt may divert their dollars to other benefits, such as 401(k) plans.

In August, the President announced sweeping student loan debt relief.  Up to $20,000 in debt will be canceled for Pell Grant recipients and $10,000 for non-Pell recipients, for individuals who make less than $125,000 a year ($250,000 for married couples).  In addition, the pause on student loan debt repayments, which was implemented at the start of the pandemic, will be extended once more, to Dec. 31.  The Department of Education has also proposed new income-driven repayment plans for undergraduate loans that is intended to lower monthly payments for student loan borrowers and help them pay off their loans in less time.

Student loan forgiveness and the debt relief is good news for borrowers.  It’s potentially good news for employers too, according to a recent Employee Benefit News article.  Some may choose to spend student loan forgiveness money on benefits programs other than student loan repayment.  For instance, employers may see this shift as an opportunity to spotlight college tuition reimbursement and student loan debt repayment offerings as a way to attract and retain bright talent.  Although eight million student loan borrowers’ debt will be forgiven automatically, some may have to formally apply.  Workers may need help understanding the application process, and employers may need to provide that assistance.

It isn’t time to toss student loan repayment and emergency savings programs out with the bathwater just yet though.  While many federal student loan borrowers will have their debt forgiven, those with private loans will not.  Since the average student loan debt is $37,000, even recent college grads could benefit from employer assistance.

In this environment, it is critical to understand your employee population and their needs. Get to know their debt situations, and rely on your benefits advisors to help find the programs that will best suit your employees and help them achieve greater financial stability.  It may also be worth reviewing current student loan repayment assistance programs and other financial wellness benefits to determine if there are opportunities for enhancement or improvement.  It may also be a good time to revisit employer 401(k) matching contributions to determine if there are opportunities to increase the match.  This may help to capture additional deferrals from employees who may have additional cash flow.  All the benefits of their student loan forgiveness debt relief.

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