During the first day of the Best of PSNC (PLANSPONSOR National Conference), Will Sealy, chief executive officer and co-founder of Summer, an organization that helps borrowers with their student loans, said there are 45 million student loan borrowers in the U.S., most of whom have federal loans, the repayment of which was put on hold this year due to the coronavirus pandemic. “But these payments are going to be due in January, averaging $400 a month, and many people may not be able to make these payments,” Sealy said.
There is another program to help borrowers, an income-driven repayment program that lowers federal student loan monthly payments to just 10% of a person’s income, Sealy noted. “Half of all federal loan borrowers can qualify for this program,” he said. “Savings range from $3,000 to $4,000 a year. That is a phenomenal amount of money, representing an income gain for some people of as much as 10% to 20%. But the challenge is that most people don’t know about this program. Only 8 million people have enrolled in it.”
The Coronavirus Aid, Relief and Economic Security (CARES) Act has a provision that allows employers to contribute up to $5,250 toward a worker’s student loan debt and receive a tax credit similar to the one they get for making a match to a defined contribution (DC) plan, Sealy noted. However, it is set to expire at the end of the year. “There is immense interest in trying to preserve this through proper legislation that will give it longevity, rather than leave it as a stop-gap solution, including a bipartisan bill that came out just a few days ago,” he said.
Sealy also noted that there are a lot of Democratic politicians who have floated the idea of forgiving student loan debt entirely, as well as making state colleges tuition free. “The former would cost upwards of $1.6 trillion and the latter would require a similar amount over 10 years,” Sealy said. He notes that while these proposals are compelling to some voters they are unlikely to pass through Congress due to their overall cost.
Jessica Ruggles, director of the financial wellness outcomes practice at Prudential Financial, agreed that financial wellness programs can go a long way to helping people better manage their student loan debt. “They are an opportunity for employers looking to enhance their benefits and to be more paternalistic, while being cost-neutral,” Ruggles said. “Companies that participate in our financial wellness program see an increase of 7 percentage points in their retirement plan, an increase of 8 percentage points in their digital engagement and a 28% improvement in job retention. With these figures in hand, now you can speak the same language as your CFO [chief financial officer].”
Kerry Van Voris, chief people officer at Oscar Health, said whatever types of benefits an employer offers, they need to communicate the upside of each benefit in all different forms. Besides email and the internet, it is important to get senior management in front of workers to talk about the benefits, Van Voris said.
Ruggles said it is also important to survey workers each year to evaluate their financial situations and determine what kinds of benefits could best serve them.
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