Student Loan Update for Employers
At our weekly webinar on August 3rd, Emeka Oguh, the founder and CEO of PeopleJoy, an MEA partner, spoke about how student loans are impacting today’s workforce and the business case for student loan repayment assistance.
How Student Debt Impact’s Today’s Workforce
According to Oguh, 45 million people in the workforce have a combined student debt of 1.6 trillion dollars. While it is a common misconception this is solely a Gen Z and Millennial problem, student debt is a problem that spans across all generations. According to Oguh, it is not Millennials, but rather Gen X, followed by the Baby Boomers, who have the most student debt. And many employers fail to recognize the very real student debt issue for their employees.
The issue of student loan debt impacts the greater economy, hindering debt holders from purchasing homes. Specifically, Oguh explains that the average college debt owner with $37,000 in debt must delay homeownership by 7.7 years, putting them well behind those without student debt. Not only are student loans delaying homeownership, but they are delaying retirement for many employees as well. According to a study from TIAA and MIT, 73% of borrowers are putting off maximizing their retirement savings once their student loans are paid off.
If the question employers are asking themselves is, “Why do I want to offer student loan assistance to my employees?” the answer is twofold. First, it is the right thing to do. Second, employee student loan assistance is good for business.
The Business Case for Student Loan Repayment Assistance
Today’s job market really is an employee-driven market. Due to the pandemic and pandemic-related issues, it has become increasingly difficult for employers to hire and retain talent. Employees want more compensation, benefits, and the option to work from home. If one employer will not provide what the employee is looking for, they will find an employer who will. According to Oguh, this is internally linked to HR burnout. Obviously, HR professionals want to make their employees happy; however, they also need to be accountable for making the business profitable.
Oguh explains that offering repayment assistance allows employers to become an employer of choice. If employers are demonstrating to their employees that they are a value-based organization, employees are more likely to stay. Organizations can demonstrate these values by practicing what they preach and giving employees benefits that cater to life outside of work.
At the end of the day, offering this program helps organizations attract and retain talent, compete on a unique level, all while doing the right thing.
Tax Friendly Student Loan Relief Policies
- SLRA is now Tax Deductible: This excludes $5,250 of employer contributions per employee to student loan repayment assistance. It will be in effect until 2025; however, it will probably be extended into the future.
- COVID-19 Administrative Forbearance is Ending Soon: Student loan payments were suspended in 2020 because of the pandemic. This was originally implemented by the Trump Administration and has since been extended by the Biden Administration. It was put in place to help those struggling to pay off other debts during an uncertain time. Biden recently extended this freeze on student loans to January of 2022.
- Secure 2.0 Act (Pending Legislation): This legislation has not yet passed; however, it is expected to become law by the end of this year. If passed, the law will allow borrowers to save for retirement using tax exempt employer contributions to their account.
To retain employees, PeopleJoy offers the employer contribution model, which consists of student loan repayment assistance and tuition reimbursement. This model requires you as an employer to make cash contributions to student loan repayments.
To foster engagement, PeopleJoy offers the employee run model, which consists of loan program assistance and coaching. These are voluntary benefits, which PeopleJoy uses to help identify different loan payment opportunities through federal loan programs.
For more information, reach out to Emeka Oguh via email: firstname.lastname@example.org.