- Key insight: Learn how employers can offset post-SAVE repayment shocks.
- What's at stake: Rising delinquencies could increase defaults and weaken workforce financial stability.
- Forward look: Prepare for July 1 repayment spikes and tighter Graduate and Parent PLUS borrowing caps.
Source: Bullets generated by AI with editorial review
Millions of Americans with federal student loan debt are already delinquent or in default, according to research gathered by Investopedia. As many borrowers face
More than 42 million borrowers carry nearly $1.7 trillion in federal student loan debt, according to independent research group The Education Data Initiative. For many of the 7 million enrolled in the now-eliminated Biden-era SAVE plan, especially those with lower incomes,
The news outlet also notes an increase in interest rates for most loans and borrowing caps for Graduate and Parent PLUS loans, which will pose challenges for those looking to fund graduate degrees or tuition for their children
"The shape of student loans is going to be altered indefinitely going forward," said Lindsay Vail Clark, chief borrower advocate and director of external affairs at student loan and education services company Savi. A primary concern is that for those already struggling to make their existing monthly loan payments, these changes could put them in greater financial jeopardy, she noted.
"One in four borrowers is delinquent, which means they have missed three consecutive monthly payments. We see about a 57-point credit score drop on average when someone reaches that delinquency, and then we've got a record number of people in default … which is nine consecutive missed payments," she said. "What you're seeing is a system in crisis, but now it's [being] rebuilt to become less flexible with fewer options, and that doesn't equate to more affordable for borrowers."
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How employers can help
Whether they're paying back loans or looking at future education options, employees need guidance, said Vail Clark.
"At a bare minimum, employers and benefit leaders can be thinking about how to provide pathways and access to education and guidance to help any of their employees with student loans, knowing that the problem is probably at its worst right now," she said. "There are robust, really expensive education benefits programs, but at a basic level, providing access to support guidance that is trusted is really important, because there are a lot of scams and misinformation out there."
To aid in this effort, Savi and Ascendium Education Group, a nonprofit that supports post-high school education and training opportunities for learners with low-income backgrounds, are offering free resources to borrowers, particularly those who have recently lost their jobs or are otherwise experiencing financial hardship. The campaign, dubbed My Way to Repay, allows these groups to "use Savi for free to find new repayment and forgiveness options. Borrowers will have access to Savi's Student Loan Guidance platform, [automated paperwork assistance], one-on-one expert support and educational resources," according to an Ascendium press release.
"We're trying to … show borrowers what their best repayment and potential forgiveness options look like based on their eligibility and give them access to … expert support," Vail Clark said. "That combination of technology and human service can provide the assistance that borrowers need right now, even as an intervention method for borrowers who have fallen behind and are at risk of delinquency and default — we really want to prevent that from happening."
Equally as important is guidance around funding future education, whether for employees themselves or their children, Vail Clark said.
"You've got a lot of folks who are trying to figure out [how to pay for] their own kids' college and who still have their own student loans," she said. "The fastest-growing demographic of student loan borrowers is aged 50 plus. Being able to provide … a mechanism of, okay, first let's look at free money that you can get through financial aid and things like that, but let's talk about a 529 and savings plans — that is just as much of a support as giving someone a tool for their own student loans."
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Building and retaining an educated workforce
By offering comprehensive guidance on loan repayment, forgiveness eligibility, and savings options, employers can help employees with paying down or eliminating existing debt as well as avoid it in the future. In doing so, they establish themselves as an organization that cares about the educational and financial welfare of workers and their families. Even basic, low-lift benefits and programs can have a major positive impact, Vail Clark said.
"Most people underestimate the level of misinformation and noise out there around student loans and education benefits. Knowing your employer takes a stance and wants to support that can have tremendous payoff," she said. "I've had sessions where one webinar completely changed the outcome for employees, because [they realized they were eligible for forgiveness]. Most folks walk away from those experiences feeling better than when they arrived, and that's our goal."
