The latest moratorium on student loan payments follows up on one of Biden’s first actions when he took office a year ago--ordering the Department of Education to put on hold federal student loan repayment through September 2021, The White House noted in a release last month. Biden extended the moratorium this past August until the end of this month.
“Now, while our jobs recovery is one of the strongest ever—with nearly 6 million jobs added this year, the fewest Americans filing for unemployment in more than 50 years, and overall unemployment at 4.2%—we know that millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments,” Biden said in the release.
Biden also asked that student loan borrowers take actions to help themselves, including looking “at options to lower your payments through income-based repayments plans…and to explore public service loan forgiveness.” Another potential game-changer is that employers also have a chance to ease the burden of their current employees and to set themselves apart from competitors by offering loan repayment options to potential recruits.
“Nearly every business relies on, and benefits from, the investment employees have made in higher education, whether that's through obtaining professional certifications or earning undergraduate and advanced degrees,” Jennifer Nuckles, executive vice president at San Francisco-based SoFi at Work, tells Society For Human Resource Management. Her company provides student loan consolidation and refinancing services.
McLaren Flint Hospital in Flint, Michigan, has boosted its current benefits and provided sign-on bonuses to deal with staff shortages and low retention, but even with these efforts realized that “we needed a game-changer,” president and CEO Chris Candela, told SHRM.
Candela’s hospital and board saw their opportunity given that competing employers were not offering student loan repayment benefits. “Speed to market was important," Candela said, noting the job market "is so competitive right now.”
The hospital gives its employees $200 a month for student loans in their first year and that goes up to $300 and $450 a month in their second and third year, respectively. The program is capped at $15,000. Of the hospital’s 1,100 employees, 172 signed up in on day one of when it was first offered last month, including for roles that could be hard to fill such as nurses, doctors, respiratory therapists and technical pharmacists.
“If we can help take something off our employees' plate, we can help reduce their stress and anxiety instead of just throwing them more money on a per-hour basis,” Candela said.
The Consolidated Appropriations Act from 2020 enables employers to make tax-exempt contributions of up to $5,250 through 2025 toward employees’ student loan debt, Forbes notes.
Allay Financial, Carvana, Carhartt, Chegg, Estée Lauder, Fidelity Investments, Google, Hulu, Lockheed Martin, Peloton, PwC, SoFi and Terminix are 13 companies that currently offer student loan payment assistance. Google introduced its student loan program last year for its U.S. workforce and matches up to $2,500 annually for payments each employee makes.
Prior to the pandemic in 2019, about 8% of employers offered a student loan payment benefit, but now 17% of organizations overall provide their employees with a student loan repayment benefit, Employee Benefit News reports, citing the Employee Benefit Research Institute’s 2021 employer financial well-being survey.
“For employers, the next five months are the best possible time to begin helping their workers repay student debt,” says Greg Poulin, CEO of student loan benefits provider Goodly. “Because interest on federal student loans has been suspended under the moratorium, any payments made before May, 2022 will be applied directly to the principal of the loan, further accelerating repayment by shrinking the outstanding loan balance faster.”
In addition to the benefit helping employers to make quicker hires and keep their talent longer, there are other payoffs, Poulin says.
“Many employers note that student loan benefits help to build a diverse recruiting pipeline and contribute to the diversification of their workforce,” he says. “Reduced financial stress has been shown to improve employee productivity and lower levels of absenteeism.”