Updated 12/20/22: Since this blog post was published, payments and interest on federally-held student loans are now set to resume 60 days after a court decision on President Biden’s forgiveness program. If no decision has been issued by June 30th, 2023, payments will resume 60 days later.
Additionally, the congressional omnibus bill includes the Secure 2.0 provision for student loans, which will allow employers to make tax-favorable matching contributions to employee retirement plans based on the amount of their monthly student loan payments. While this is an exciting opportunity, HR teams will be tasked with adhering to the new guidance and tax codes, setting up systems to manage contributions, and most importantly, helping their employees navigate the change.
Q4 is underway, and employers are determining how to end 2022 well while setting up a strong start to the new year in the midst of an uncertain economic environment. At the same time, the next several weeks will usher in a number of key developments on the student loan front, namely forgiveness and the end of the payment pause. Consequently, borrowers with federal student debt — including those in your employee population — can expect January 2023 to look and feel quite different.
To put it plainly: both employers and employees are shouldering a great deal of economic uncertainty these days. This means it’s even more important for organizations to support their employee populations without increasing the administrative burden on already taxed HR teams.
As your team thinks through benefits, now is the time to consider adding an end-to-end student loan assistance solution that is shown to drive employee retention, engagement, and performance. Whether you’re already vetting options or just beginning the process, here are the steps your organization should take to set your HR team and employees up for success in the weeks and months ahead.
What to do before the end of 2022
Employers can help employees immensely by sharing trusted communications about student loan updates and upcoming deadlines. There have been a lot of developments in recent months, and staying on top of everything can be overwhelming.
To start, federal loan payments are set to resume next year so millions of borrowers will be expected to make payments after a nearly three-year break. The average student debt payment is $393, a not-so-insignificant amount that borrowers will now need to incorporate into their monthly budgets.
On top of this, some borrowers have had their loans transferred to a new servicer during the payment pause, so employers should remind employees to brush up on the details for their loan payments as soon as possible. These details include knowing who their loan servicer is, how much they’re supposed to pay each month, and when the payment is due as well as ensuring the loan servicer has the borrower’s proper contact information on file.
Then there’s the forgiveness plan. Per the Biden administration’s August announcement, qualifying borrowers can receive up to $10,000 or $20,000 in forgiveness once the plan goes into effect. While the original announcement was light on details, more information about the plan’s implementation continues to emerge. Still, the biggest question for borrowers is “do I qualify?” Employers can assist their employees in answering this question by directing them to helpful resources, including the Department of Education’s subscription page for updates and Summer’s digital forgiveness eligibility tool.
Lastly, for nonprofit and public sector employers, reminding employees that Public Service Loan Forgiveness (PSLF) still exists, although the limited waiver expired in October, is one of the best deals out there.
What to consider before 2023 starts
Even though economic uncertainty and financial anxiety are on the rise, employers are continuing to have difficulty hiring and retaining employees. A recent Labor Department report found that voluntary quitting is still going strong: 100,000 workers left their jobs between July and August.
As an employer, providing high-value benefits is one of the best ways to attract and keep talent, and student loan assistance stands to be more impactful than ever as borrowers resume payments. In fact, a 2022 Fidelity report on top employee benefit trends notes that while 42% of companies provide some form of student loan assistance, that percentage is expected to increase as more employers seek to help employees with their debt once the payment freeze ends.
It’s also important to point out that employees really want these benefits: per a recent John Hancock study, 89% of workers expect financial wellness benefits from their employers. Given that roughly 43 million Americans owe a cumulative $1.7 trillion in federal student debt — with the average borrower owing $37,000 — it’s understandable why this is the case. And research shows that these benefits are worth it since employee financial stress leads to decreased productivity, weaker company culture, and higher turnover. One in five employees admit that their productivity has been negatively impacted by their financial stress.
As 2023 planning gets underway, now is the optimal time to incorporate student loan assistance into your organization’s list of benefits. A comprehensive digital student loan solution like Summer will provide your employees with trusted, personalized guidance on how to handle their student debt, from applying for forgiveness to enrolling in affordable repayment plans to refinancing loans. By making student debt manageable, a student loan assistance solution can alleviate your employees’ financial stress and improve their performance at a crucial time.
Using a third-party solution also alleviates the administrative overhead for your HR team. Rather than inundating your HR team with questions and pulling them away from other important projects, employees can reach out to experts whenever they need assistance; they can also submit forms digitally so your team isn’t stuck sifting through paperwork. And there’s another benefit for distributed teams: a student loan solution is equipped to provide your employees with state-level guidance so your HR team doesn’t have to track the latest developments across multiple states.
Employers are facing a lot of unknowns going into 2023, but investing in an end-to-end student loan benefit is a great way to provide your employees and organization with needed support in these uncertain times.
Schedule a one-on-one demo with our product specialists to see how offering a comprehensive digital education assistance solution through Summer can help increase productivity and retention within your employee population in 2023.