EDCOR NEWSLETTER
Next Steps for Student Loan Borrowers: Navigating the Post-September Landscape
There has been a lot of debate and discussion about student loan repayments over the past year, and many apprehensions have surfaced since the Supreme Court rejected the Biden administration’s one-time student loan relief plan. Further, the federal student loan moratorium that started in March 2020 as a response to the COVID-19 emergency and set all student loan interests to 0% for millions of borrowers has now come to an end as student loan repayments will begin for about 37 million borrowers. We aim to cut through the noise and inform corporates and their employees about the available facts and resources regarding student loan payment resumption, and guide them on how to navigate the post-September landscape.
First, let’s get some facts straight:
- The student loan interests have started accruing since September 1, 2023. Borrowers will have to begin payments in October.
- The Department of Ed and loan servicers will notify borrowers before payments start. Loan servicers ideally should also provide the billing statements and notices a minimum of 21 days before the first payment is due.
- The resumption of federal student loan payments will increase the monthly payments for borrowers with both private and federal loans even though they might have been paying off their private loans so far.
- For those who graduated during the COVID-19 pandemic, federal loan payments never started – until now. So, they should be cognizant of the fact that they’ll have to make the payments now.
How can Corporate America Help?
One of the most powerful ways in which Corporate America can help their employees with student loans is by including Student Loan Repayment Assistance in their education benefits portfolio. These programs can take various forms, such as direct financial contributions towards loan payments, employer match programs where employers match a percentage of employee loan payments, or structured repayment plans that incorporate employer contributions. By offering these programs, corporations demonstrate their commitment to employee financial well-being leading to talent retention. They provide immediate relief to employees burdened by student loan debt and help alleviate the overall impact on their financial stability.
Click on Learn More to keep reading about Next Steps and Strategies for borrowers to ease into Payment Resumptions
CEO’S CORNER
As the student loan mortarium comes to an end and payments resume, the IRS hosted a webinar named ‘Qualified Education Assistance Programs’, on September 14 which was sponsored by U.S. Senators Mark Warner and John Thune. The webinar was aimed at clarifying regulatory adherence and enhancing understanding of how to introduce Student Loan Assistance initiatives as a part of the education assistance programs. Key insights are as below:
- Organizations are required to have a structured plan outlining the Student Loan Repayment Assistance.
- Employees should be made aware of the specifics of the advantages they are granted.
- The benefits should be equitable, with no bias towards high-earning workers or stakeholders.
- Organizations should not provide a choice between student loan repayment aid and other compensation or benefits.
- Loans taken out by employees for their education are the only ones eligible for contributions.
In a bid to harness the power of Student Loan Repayment Assistance, the IRS revised its guidelines in March 2020, permitting employers with education benefits to make tax-free contributions to student loans, with a cap of $5,250. This initiative received a boost from the Consolidated Appropriations Act of 2021, which lengthened the tax-free provision under Section 127 of the CARES Act up to December 31, 2025. Thanks to these shifts, businesses can now launch these benefits more cost-effectively while showcasing their commitment to employee’s financial well-being, thereby bolstering their ability to recruit and retain top talent. Edcor can help organizations with this and more.
Let’s future together!
Adrienne L. Way, Edcor Owner, President, and CEO
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