Student loan payments are due. Can employees catch up?

October 2, 2023 5:30 AM

Are you ready to pay your student loans?

For many borrowers whose federal loan repayments kick in this week — after more than three years of paused payments launched in the early days of COVID-19 — the answer is an alarming "no."

The outstanding balance for student loan debt has reached $1.6 trillion across 43 million Americans, according to the Federal Reserve. The average federal student loan debt is $37,338 per borrower, according to a 2023 report from the Education Data Initiative, and the private student loan debt averages at $54,921. In June of 2023, the Supreme Court voted to reject President Biden's plan to forgive up to $20,000 in federal student debt for every borrower.

As Americans prepare to meet these payments, many will be turning to employers for help. But only 7% of U.S. employers offered student loan repayment assistance at the beginning of 2022, according to a survey from the Society for Human Resource Management. That number is expected to rise to nearly half in the next few years, according to a 2022 survey by the Employee Benefit Research Institute, as companies are faced with employees' vocal demands.

What are the ways to provide support? Catch up on our recent coverage and help employees feel secure in their financial path forward. From embracing new federal programs to launching innovative employee benefits offerings, organizations can play a key role in helping employees feel secure in the finances — now, and in the future.

A look at Biden's SAVE plan

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Student loan payments are starting up: Here's a look at Biden's SAVE plan

President Joe Biden's SAVE plan is a new income-driven repayment plan that has the potential to cut monthly payments down to $0.

"The SAVE plan will potentially help Americans pay off their debt quicker, allowing them to start buying houses, start families, and all those other things that had been slowed down because of their debt," says Dan Macklin, president of Summer, a company that partners with employers to help borrowers navigate and reduce their student loan debt. "But SAVE is exciting and confusing in equal measures."

What Secure 2.0 means for student loan debt

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Student loan payments restart in October. Are employees ready?

Currently, there are three major ways employers are helping their workforce pay off their student loans, according to Tomas Campos, the CEO of Spinwheel, a software company that enables benefits providers and employers to offer student loan assistance programs.

First is simply offering financial literacy tools to help employees strategize their payments. Second is through the SECURE Act 2.0, which allows employers to make matching contributions to employees' loans as if they were 401(k) contributions. The third is through student loan repayment assistance programs, which were incentivized during the pandemic by the now discontinued CARES Act, which made it possible for employers to contribute $5,250 a year to employees' loans, tax free. Today, he notes, these kinds of employee benefits are available through private vendors and programs.

Where loans and retirement meet

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Schwab and Vault help employees juggle retirement savings and student debt

To help employees pay off their student loans without impacting their retirement savings, Schwab teamed up with Vault, a student loan benefit provider. The partnership will help Schwab's 401(k) plan participants strategize the best way to pay off their loans, as well as walk them through other options, like lowering payments or refinancing their debt.

"One of the key questions that individuals are trying to solve is, 'Am I better off paying my student loans a bit quicker?' and how can they navigate those decisions," says Adrian Miguel, director of advice at Schwab Retirement Plan Services. "This service is a great opportunity for us to educate individuals about what their options might be, whether it's paying down that debt quicker, looking at their budget so that they can afford their payments, and helping people have a more secure future for retirement."

Financial planning gets creative

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3 steps to improve student loan relief after SCOTUS ruling

In a recent op-ed, Mark Haessly, managing director of product management at HSA Bank, pointed out some overlooked opportunities to help employees get on steady financial footing:

"Benefits should be created to enhance and support teams. With more than half of Americans reporting that money worries erode their mental health, employers have a duty to prioritize programs to address these concerns. This can be done by increasing annual matching contributions for FSAs and HSAs during times of increased uncertainty to help support eligible mental health expenses.

"Lifestyle spending accounts, or LSAs, are another up-and-coming program that allows companies to offer flexibility in how their benefits are used. These are post-tax, employer-funded accounts that can be used to help employees save on common expenses like gym memberships, personal or family counseling and even financial planning courses. These accounts allow organizations to provide flexibility in their overall offerings but also react quickly to timely matters that impact the well-being of employees."

Competitors are calling

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15 remote-friendly companies providing student loan benefits

For employers who don't have a plan to help their workforce manage student loan debt, be prepared to lose talent.

Remote jobs search engine Flexjobs put together a list of remote-friendly companies offering student loan assistance, ranging from healthcare and financial services companies to marketing and media. Some companies, like Aetna, offer annual matches, giving employees up to $2,000 a year to help them tackle monthly payments. Other companies like Peloton contribute a fixed amount each month to their employees. Either way, these employers are helping employees chip away at their student loan debt, benefiting their workforce and themselves.

"Offering student loan benefits is impactful because we are experiencing a time where millions of professionals and younger workers are heavily burdened by their student loan debt," says Keith Spencer, career expert at Flexjobs. "This has the potential to improve employee loyalty and longevity."