We’re Headed Back to Repayment – Now What?

Posted on: July 24, 2023

With a much-anticipated decision on June 30, the U.S. Supreme Court struck down President Biden’s plan to forgive federal student loan debt for millions of Americans. The 6-3 decision ruled that the Administration lacked the authority to forgive what amounted to $430 billion in student loan principal.

What Repayment Means for Employees with Student Loan Debt

The roughly one in eight Americans who would have received relief from a different decision now face the prospect of repayment for the first time since March 2020. Interest will start accruing again on September 1, and payments will resume on October 1 for borrowers.

As payments resume, employers can expect employees who haven’t made payments in over three years to find it stressful to find room in budgets that have filled with car or house payments, credit card debt, or other obligations in that period of time. People who were making payments are out of the habit, and 7 million borrowers are 24 or younger – meaning they’ve never yet made a student loan payment.

How Employers Can Help

We detailed in our whitepaper, Helping Employees Prepare for Student Loan Repayment, several ways employers can help to relieve stress employees may be feeling as repayment resumes. We offered practical strategies for providing guidance, such as directing employees to relief programs and helping with verification for income-driven repayment programs. Now is the time to take action and provide guidance and encouragement.

Offering a Student Loan Repayment Benefit

One of the best ways employers can provide relief to their employees who have student loan debt is to set up a student loan repayment benefit. Some employers may be planning to implement a provision of SECURE Act 2.0 that, as of 2024, allows employers to recognize an employee’s student loan payment as an eligible contribution to a retirement fund for employer matching purposes. Many employers haven’t waited for that. They’ve taken advantage of legislation provided through the CARES Act that allows them to make payments toward their employees’ student loans, with an annual contribution limit of $5,250 tax-free per employee per year.

Employers who are concerned that making these changes for employees with student loan debt may be unfair to those who don’t carry education debt can offer other options such as allowing employees to have the employer match their 529 college savings contributions instead. There are many ways to structure meaningful education benefits to offer relief to the wide variety of employees an organization may serve. For employers who aren’t positioned to handle extra paperwork or data management, experienced administrators like BenefitEd can customize programs like our Employer-Assisted Student Loan Repayment – or other education benefits – to organizational needs and get programs up and running with minimal effort by the employer.

Now is the Time to Make Changes

Employees are savvy about the student loan benefit options offered by an increasing number of companies over the last few years. Those who are particularly stressed about upcoming student loan payments won’t hesitate to start looking for debt relief by seeking positions with companies that offer student loan benefits. It’s essential for employers to reach out now to their employees and recognize the coming change; many of their employees may need additional guidance and support.

If our experienced team at BenefitEd can assist in any way with setting up education benefits to help support your employees, reach out to us today.