Biden Extends Student Debt Relief: What Employers Need to Know
The current labor market is tighter than ever thanks to the pandemic and the Great Resignation. As a result, employers have continued searching for creative strategies that will give them the edge when it comes to recruiting and retaining top talent.
One idea that’s been gaining traction is offering student loan debt relief as part of an employee benefits package. But will those packages be affected now that the Biden-Harris administration has extended the federal student loan debt relief program? Read on to learn more.
The Current State of Student Debt in the U.S.
During the last 40 years, the cost of higher education has nearly tripled in the United States. Young graduates head out into the workforce carrying with them a costly burden that impedes their ability to save money, buy homes, or even invest for retirement. Currently, the number of students borrowing money to fund their education exceeds 45 million, and the cumulative debt incurred is an astonishing $1.6 trillion and rising.
The largest group of borrowers are millennials—3.49 million of them—who currently owe $20,000 to $40,000 in debt, followed by 1.95 million Gen Zers, who owe $10,000 to $20,000. Interestingly, Generation X, which consists of only 1.66 million borrowers—the least of these three generations—owes the most debt: $40,000 to $60,000.
With education costs continuing to spiral out of control coupled with rising inflation, the outlook for borrowers appears to be bleak. However, government and industry have stepped in to offer some solutions.
The Biden-Harris Administration’s Student Debt Solution
Since President Biden stepped into the White House, individuals who held federal loans were granted a pause in their repayment efforts until August 31st of this year as a way to combat the financial crisis brought about by the COVID-19 pandemic. However, just before the pause was set to expire, Biden extended it one final time until December 31, with repayment resuming in January of 2023.
In addition to the extension, the Biden-Harris plan will provide debt relief to low and middle-income families by providing up to $20,000 in debt cancellation for individuals with PELL Grants held by the Department of Education and up to $10,000 to non-Pell Grant recipients. However, to be eligible for these benefits, individual annual income cannot exceed $125,000 and household income can not exceed $250,000.
Furthermore, some of these borrowers may be eligible to have all of their loans forgiven if they meet the Public Service Loan Forgiveness criteria, which require borrowers to be employed by specific government entities.
Lastly, the Biden-Harris plan addresses the current student loan system, proposing changes that will make it more manageable for borrowers coming from lower- and middle-income households by reducing or eliminating some loan payments.
Current Industry Debt Relief Solutions
Since recruitment and retention are so critical for employers right now, 17% of them (according to the Employee Benefit Research Institute) are revising employee benefits packages to include some type of student debt assistance, with an additional 31% to follow.
Because debt is a major concern for employees, particularly millennials in the job market, this is a great way to attract talent, while at the same time making a significant contribution to the financial well-being of employees.
Some organizations that already offer these types of benefits are Abbott, Google, Hulu, and Staples, and the types of benefits that these and other organizations are offering include:
- 401(k) contributions that match the amount of money employees put toward debt
- Flat monthly contributions the company pays to employees that will go toward loan debt
- Contributions made by the employer based on the number of hours employees worked
Other types of financial assistance that employers are offering include debt-management training, student loan consolidation, and refinancing services.
Judging by the numbers, student loan debt is not going away anytime soon—even with the government committed to implementing relief measures. For employers looking to attract and retain talent, offering benefits that will help tackle the student loan debt crisis may work in their favor, especially since only 7% of organizations are currently offering such benefits.
This can be a win-win situation, as employers find the talent they seek to fill vacant roles, and job hunters find employers who want to help them improve their financial well-being.
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