Rosalind Evans
As President Biden’s ambitious student debt relief plan faces legal hurdles, a beacon of hope emerges for borrowers from an unexpected quarter: their employers. Recently, companies across various scales have been innovatively addressing the student loan crisis. They’re offering direct assistance and integrating debt solutions with retirement savings plans. This corporate intervention comes when legislative efforts and public sentiment align in favour of such workplace benefits.
The legal stalemate over the Biden administration’s plan to alleviate student debt is undeniably worrying for borrowers. However, many employers are now pivotal in easing this burden. Companies have recognized that aiding in student loan repayment is not just a tool for recruitment but also a significant factor in retaining talent. The Great Resignation period has highlighted the importance of benefits like student loan assistance in employee retention strategies.
Matthew Kerzner from Eisner Advisory Group emphasizes the critical role of such benefits in addressing employee financial stress. Meanwhile, platforms like the Goodly Jobs Board and FlexJobs are making it easier for job seekers to identify companies that support student loan repayment, further highlighting the growing trend.
The potential return of student loan debt repayment, looming in August 2023, adds urgency to this issue. Employers are exploring various benefits to attract and retain talent, especially if Biden’s plan to forgive a portion of the $1.6 trillion in student debt falls through.
One innovative approach is the company match of student loan payments. Kristen Carlisle from Betterment at Work points out that this method not only aids in debt repayment but also promotes financial responsibility among employees. Thanks to COVID-relief legislation, employers can contribute up to $5,250 per employee annually, tax-free, for education expenses, including student loan assistance, until 2025.
Another notable initiative is linking student debt relief with retirement savings. Pioneered by Abbott, this strategy allows employees to focus on loan repayment while contributing to their 401(k) plans. The potential passage of the SECURE 2.0 legislation could further encourage such programs, enabling more companies to offer similar benefits.
Jeff Cimini of Voya Financial highlights the dual advantage of this approach: it addresses student loan debt while fostering long-term savings habits. The success of Abbott’s program, which saw a significant increase in participation since its inception, underscores the effectiveness of this strategy.
Beyond financial contributions, companies also provide valuable debt management advice and tools. This assistance helps employees understand their student loans comprehensively, offering guidance on balancing debt repayment with other financial objectives. Carlisle stresses the importance of incorporating these tools into benefits programs.
Despite these efforts, the massive scale of the student debt crisis remains a daunting challenge. Professionals in the field remind us that even if Biden’s plan to cancel up to $20,000 in federal student debt goes ahead, it barely scratches the surface of the approximately $1.6 trillion federal borrowers owe. Additionally, the $131 billion in private student loan debt remains unaffected by federal relief measures.
The student loan crisis demands multifaceted solutions. While the Biden administration’s efforts are crucial, the role of employers in providing debt relief is becoming increasingly significant. This corporate involvement helps employees manage their debt and is a powerful tool for employee retention and financial wellness. As the student loan debt landscape evolves, the synergy between governmental initiatives and corporate responsibility will be vital in addressing this pervasive issue.
