Help Wanted: Help With Student Loans Given

During my recent webinar on Coping Strategies to Overcome the Shortage of Therapists Looking for Work – Hiring, Recruitment, Retention and Engagement, one of the ideas discussed was offering assistance with helping to pay off student loans. The NYTimes recently had a great article by Ann Carrns discussing this. Here is a replay:

Employers see the aid as part of a bid to attract workers, especially as the federal pause on student loan payments ends on May 1. As employers seek to hire and keep workers in a challenging job market, more are weighing offering help with student debt repayments as a job benefit. That’s good news for student loan borrowers because a freeze on federal student loan payments, part of the government’s pandemic relief effort, is scheduled to end on May 1. Millions of borrowers — many of whom haven’t made loan payments in nearly two years — will once again have to start paying their monthly bill.

Student debt repayment programs were a hot topic in 2019, but companies’ interest ebbed in the pandemic, said Craig Copeland, senior research associate with the Employee Benefit Research Institute, as the pause on federal student debt payments temporarily took pressure off borrowers. Employers shifted their focus to programs offering more immediate help, like emergency savings and hardship payments. But there are signs of renewed interest among both borrowers and employers as the pause expires and employers seek to hire and hold on to increasingly emboldened workers.The institute’s 2021 survey of employers’ “financial well-being” benefits found that about 17 percent of large employers — those with 500 or more workers — offered some form of student debt assistance. Of those, nearly a third (30 percent) offered direct loan subsidies and an additional 40 percent said they planned to start offering direct help in the next year or two.

“I would think adoption would start ticking up as we get to a more normal work environment,” Mr. Copeland said.In 2019, typical borrowers with any remaining debt from their own education owed $20,000 to $25,000, and the typical required monthly payment was $200 to $300, according to a report from the Federal Reserve.
A Fidelity Investments survey in October of about 1,600 employers of varying sizes found that more than a quarter (29 percent) offered a contribution to student debt as a benefit. And more employers are likely to consider it, now that the federal loan payment pause is scheduled to expire. “It’s creating a sense of urgency right now,” said Jesse Moore, head of student debt at Fidelity, which administers student debt repayment programs for clients and offers a benefit to its own employees. (It recently increased the maximum benefit to $15,000 from $10,000.) A big factor is that under the federal government’s pandemic relief programs enacted in 2020, employers are able to make tax-exempt loan repayment contributions to their employees of up to $5,250 a year through 2025. Employees don’t have to pay income taxes on the benefit. (Previously, unlike tuition assistance payments for employees enrolled in college, loan-repayment contributions were taxable.)

McLaren Northern Michigan Hospital in Petoskey, Mich., is among the employers that have added a direct assistance benefit. The hospital began offering student loan aid this month, joining two other hospitals in its health system, said Todd Burch, McLaren Northern’s president and chief executive. It has become especially difficult to keep nurses, Mr. Burch said, because they are increasingly able to work on lucrative mobile assignments as travel nurses. “We’re looking for unique offerings to recruit and retain top talent,” he said. The benefit is available to all employees after they have worked at the hospital for six months and pays $200 a month in the first year, $300 monthly in the second year and $400 monthly in the third year, with a maximum benefit of $12,000. (Benefits are prorated for part-time workers.) Already, 91 employees have applied for the benefit.McLaren works with Goodly, a start-up that manages student loan payment benefits for companies. Workers submit their loan information to Goodly, which verifies the worker’s eligibility and transmits payments from the employer to the lender.

Esker, a software company with U.S. headquarters in Wisconsin, began offering the benefit in 2019. The company generally hires workers directly from college, so education loans are often a concern, said Anne Donarski, the company’s director of finance and administration.“We know student debt is becoming an increasing burden,” she said.
Employees are eligible from their first day on the job, but the contribution increases with their tenure at the company — from $100 a month to start, up to $150 a month, payable over five years. The company has about 200 employees, and 55 use the benefit. Esker has so far paid about $186,000 in loan help, Ms. Donarski said.
Here are some questions and answers about student loan repayment benefits:

What types of loans are eligible for repayment benefits?
Details vary by employer, so it’s best to ask, if you’re considering joining a company because of its student debt benefits. For a student loan to be repaid by an employer tax-free, it must be borrowed in the employee’s name and used for the employee’s education, said Greg Poulin, co-founder and chief executive of Goodly. (Some employers may choose to repay loans held by a worker’s spouse or child, he said, but the income then becomes taxable.)

In general, both federally held loans and those borrowed from a private lender are eligible for the benefit.

Do all student loan assistance programs offer direct payment?
Direct payment “is the richest benefit,” said Mr. Moore at Fidelity. But some companies may offer alternatives, like payments tied to the company’s 401(k) retirement plan. Workers make student loan payments themselves and then the company deposits a corresponding “match” into the employee’s 401(k) account. (Legislation pending in Congress aims to make it easier for employers to offer this option.) Another option that companies may offer includes help with refinancing student debt.

But make sure you understand the details of any plan before you enroll. Refinancing federal student loans, for instance, means giving up borrower protections that aren’t available with private loans. “Borrowers should be careful about what they’re getting,” said Mike Pierce, executive director of the Student Borrower Protection Center.

How likely is it that the government will cancel student debt?
The complete cancellation of federal student loans is unlikely. President Biden has voiced support in the past for canceling $10,000 of student debt per borrower, while Democrats like Senators Elizabeth Warren and Chuck Schumer, the majority leader, are pressuring the president to cancel $50,000 per borrower, by executive action if necessary.

Sandy Baum, a nonresident senior fellow at the Urban Institute’s Center on Education Data and Policy, said in an email that she suspected that the administration might target forgiveness to specific groups of borrowers, like those who were victims of fraud and abuse. But blanket forgiveness, whether by executive action or by legislation, “seems unlikely,” she said.

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