Posted on: June 1, 2023
With the pause on federal student loan repayment inevitably ending, some of your employees may find themselves unprepared to add student loan payments back into the budget. In fact, the latest federal data shows that only 500,000 borrowers – out of 42.9 million federal loan borrowers – have made payments during the past three years when payments weren’t required.1 In that time, the economy has become more challenging, with the price of most common goods, housing, and interest rates all rising.
Why You Should Help Your Employees Prepare for Repayment
1. Many employees will find student loan payments difficult to fit into their budget again We all get used to our budget. In three years, the lack of a federal student loan payment – which can average as much as $393 monthly2 – may have allowed your employees flexibility to make other life changes such as buying a house, having a family, or acquiring other debt. When the payment pause ends and student loan payments are again required, borrowers who haven’t prepared may find they struggle to stay current, leading to financial stress at best and delinquency or default in a worst case scenario.
2. Actions can be taken by borrowers now to prevent hardship, but most aren’t taking them. There are plenty of payment plan options available, including income-driven repayment (IDR) plans that allow borrowers to keep payments low based on their income. While borrowers can make changes to their payment plan now in preparation for the return to repayment, federal data shows that many of them haven’t taken advantage of the time in repayment pause to do so. In addition, some borrowers would first need to consolidate their loans into a new Direct Consolidation loan in order to be eligible for an
3. A shift to employers offering student loan repayment benefits is a real possibility. Since COVID-19, an increase in remote work, reevaluation of life goals, and other factors led to some of the highest resignation rates we’ve seen in recent decades. In response to these workforce changes and the challenging economy, increasing numbers of employers now offer Employer-Assisted Student Loan Repayment. The possibility exists that the return to repayment could find large numbers of unprepared employees juggling student loan payments and scrambling to leave their jobs for employers who offer assistance with paying down their student loan debt.
4. It’s the right thing to do – for employees and your organization. Last, but by no means least, helping your employees prepare for repayment is something you can do to acknowledge that you understand the challenges they face. By directing employees toward resources that help them prepare for repayment, you can help prevent hardship and decrease stress for them, increase their productivity and organizational loyalty, and create happier, more engaged employees.
Where to Go for Resources
Most employers aren’t experts on student loans and, like with taxes, you don’t have time or interest in being responsible for advising employees about what to do about their student loan payments. In our comprehensive whitepaper Helping Employees Prepare for Student Loan Repayment, you’ll find simple strategies to help you direct employees toward trusted resources such as those provided by the U.S. Department’s office of Federal Student Aid. These resources can help employees with student loans evaluate their situation and take actions that prepare them for the return to repayment. In this whitepaper, you’ll also find a few other tips that can help your organization and your employees prepare for a successful end to the payment pause.