Federal student loan payments are ramping up again, resuming in October 2023 after a three-year interest-free pause due to the COVID-19 pandemic. Debt is stressful, and about half of students who borrowed money to attend school are still paying off loans 20 years later, according to the Education Data Initiative.
The Biden administration’s effort to forgive billions of dollars of student loans was blocked by the Supreme Court in June 2023. Many of your employees may have been banking on loan forgiveness to ease their debt burden. Your employees may turn to you for assistance, and there are ways you can help them.
Student Loan Retirement Matches
An employer can make a matching contribution to an employee's defined contribution retirement account when the employee makes a payment toward a qualified student loan. The benefit to employees is that they can continue to pay their student loans while receiving contributions to their retirement plans. Additionally, employers have the benefit of being able to make tax-free contributions in certain cases, which helps recruit and retain talent. Employers will have fewer administrative burdens thanks to the SECURE 2.0 Act, making this a more appealing benefit to offer. Beginning in 2024, an employer may treat an employee's qualified student loan repayment as an elective deferral or after-tax contribution. The Internal Revenue Service (IRS) is expected to issue regulations to clarify this rule by the end of 2023.
Personalized Financial Wellness Program
Many employers have access to this benefit, yet employees don’t know about it. Retirement providers often have resources for employees that are highly underutilized. They typically have advisors who can meet with employees one-on-one to discuss retirement plans and how to reach their objective based on their financial situation. Employee assistance programs (EAPs) also may have these resources at no or low cost. Simply helping your employees build a plan to manage their student loan debt can be an immensely powerful benefit.
Trading in PTO/Vacation Time
Allow employees to “cash out” unused paid time off at the end of the year and have them apply it to their student loans. Doing so limits the carryover financial burden that can occur when employees carry over excess vacation time and allows the employer to control some of that.
Employers Council members can access our whitepaper titled Educational Benefits to get insight into including education-related offerings as part of their benefits and total rewards strategies. If you need assistance implementing plans or have any questions, please email our Member Experience Team.
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