If Biden's student loan plan fails, these benefits can help pay off student debt

If Biden’s student loan plan fails, these benefits can help pay off student debt

Biden’s student debt relief plan remains stuck in legal limbo, but some borrowers have one saving grace: their employer.

Companies have mobilized in recent years to help student borrowers get rid of the yoke of debt. They do this in a number of ways, including offering direct help or through relief tied to employee retirement savings.

There is broad support for making student loan assistance more readily available as a workplace benefit, and retirement legislation being considered by Congress may soon provide further impetus. Among Americans with student loans, 87% somewhat or strongly agree that college savings plans and student loan debt solutions are important benefits employers can offer, according to a June survey from Voya Financial. Additionally, among Americans with student loans, 84% said they would be more likely to work for an employer who offered help paying off their student loan debt.

Companies are spending huge sums of money to recruit top talent, but retention remains a thorny issue, especially amid the big quit. Benefits are one of the reasons employees choose to stay with a company, and student loan repayment is an increasingly talked-about benefit given the financial stress it causes, says Matthew Kerzner , managing director of the consulting firm Eisner Advisory Group.

As many businesses wait to see what will happen with Biden’s rebate plan – which ran into another problem this week when a federal appeals court on Wednesday refused to stay a Texas judge’s decision according to which the debt cancellation plan was illegal – many others recognize the need for action.

The Goodly Jobs Board, which helps job seekers find companies that help pay off their workers’ student loans, lists more than 250 companies β€” small to large β€” offering these kinds of benefits. FlexJobs, meanwhile, has identified 30 companies, including Aetna, Google, Fidelity Investments and Peloton, that help with student loan repayments and also hire for remote work, another highly sought-after perk.

Student loan debt repayment may not start again until August 2023, but it will eventually return. Here are some increasingly popular benefits that will be even more useful in attracting and retaining workers and helping them pay off student debt if President Biden’s plan to erase some of the $1.6 trillion in debt fails.

Company matching of student loan repayments

Companies offer different types of student loan assistance programs, with varying eligibility criteria, annual caps, and maximum benefit amounts. Every program is different, so employees should make sure they understand the details of their company’s program.

Some employers have chosen to offer the benefit as a company consideration, which is ideal because it helps encourage financial responsibility among employees, said Kristen Carlisle, chief executive of Betterment at Work, which administers these types. of advantages.

For employees, there is an additional benefit, at least until 2025. Over the next few years, thanks to Covid relief legislation, employers can make contributions of up to $5,250 per employee per year. year, non-taxable to the employee, for educational expenses such as student loan assistance. Even if a company contributes more than the $5,250 for a portion to be taxable, or if the non-taxable benefit ends, helping reduce student debt still leaves the employee in a better position, Kerzner said.

Student Debt Relief Linked to Retirement Savings

Another approach, pioneered by Abbott, encourages employees to pay off student debt in exchange for retirement savings contributions. In the case of Abbott, when employees show that they are using at least 2% of their eligible salary to reduce student loans, the company contributes 5% to their 401(k) accounts. The company has received permission from the IRS to structure its program this way, and other companies are beginning to follow suit.

This type of program could gain momentum with the potential passage of retirement legislation, dubbed SECURE 2.0, making its way through Congress. The provisions of the law would allow more companies to support their employees through this type of student debt relief linked to retirement savings. Even if it doesn’t pass this year, confidence is high that it will in 2023, Carlisle said.

Employers are interested in providing this type of relief because not only does it help reduce student debt, but it also encourages long-term savings, said Jeff Cimini, senior vice president of retirement product management. at Voyage Financial. Among the employees According to recent data from Voya, 91% of Americans with student loans somewhat or strongly agree that they would save more money for retirement if their employer helped pay off their student debt.

Since the Abbott program launched in 2018, approximately 1,900 employees have signed up. In 2021, the average monthly signup was 50% higher than in 2019, according to the company.

β€œStudent loan debt is one of many things that impact short-term financial security. People who feel better about their short-term financial security are more likely to put money aside or to invest for the long term,” Cimini said.

Debt management tips and tools

Some companies also offer debt management tools that help employees manage their student loans themselves. This can be a huge added value, Carlisle said, because it helps employees get a complete picture of their student loans. This includes understanding the interest they pay and advice and guidance on how to pay down debt, while saving for other financial goals. “Employers really need to think about this as part of their benefits package,” she said.

Remember: Biden can’t wipe out the entire $1.6 trillion debt

Even if Biden’s plan to forgive up to $20,000 in federal student debt is authorized, it’s still not enough for many of the roughly 43 million federal borrowers who collectively owe about $1.6 trillion. , according to professionals who help borrowers with student loan problems. .

Although the pandemic-induced reimbursement pause, in effect since March 2020, has been extended again, it gets the box on the road, but does not eliminate the problem entirely, they said. According to data and analytics firm MeasureOne, there is also about $131 billion in outstanding private student loans, which are not subject to the federal payment pause or Biden’s cancellation plan.

It’s an opportunity for companies to add a benefit that can have a significant effect on employees and retention. “It’s a wonderful retention tool,” Kerzner said.

#Bidens #student #loan #plan #fails #benefits #pay #student #debt

Leave a Comment

Your email address will not be published. Required fields are marked *