The media is abuzz with the August 24 historic announcement about the Biden-Harris administration’s federal student loan forgiveness for individuals making less than $125,000 annually, a final extension to the payment freeze on student loan repayments till December 31, 2022, and a proposal on steps to create an income-driven repayment (IDR) plan.
The forgiveness aims to get some of the debt off the books for young people who are being stymied by it and to help the middle- and lower-income rungs of the ladder. It is being seen as a step towards racial and social equality as it benefits people of color and people who take jobs that help society function like teachers, federal employees, state and municipal employees, and frontline workers.
Let’s review some key elements and consequences of this, and what it means for the borrowers and Corporate America at large.
It doesn’t apply to anybody who went to a state school and paid for all of it, people who have already paid for their student loan debts, people who took private loans, or people who chose different career paths and did not go to college.
According to The Penn Wharton Budget Model which presents a breakdown of the share of forgiveness by income group, about 75% of the benefit goes to households making less than $88,000 annually. The forgiveness will benefit 43 million borrowers overall who qualify in some way, 27 million borrowers are eligible to receive $20,000, and 20 million U.S. citizens will have a zero balance on their student loans as a result of this relief.
And yet, it doesn’t take away from the fact that Student loan debt is the second highest debt in America – only next to mortgages. Even though forgiveness is a relief to millions, it’s not an ultimate solution to the systemic issue of high college fees and ever-increasing costs associated with getting a degree.
The Edcor whitepaper on “Three pronged strategy to solve the student loan crisis in America”, talks about how borrower prudence and Government reliefs alone are insufficient to solve the crisis. Corporate America needs to pitch in too and shoulder some of the burdens since the degree holders are eventually working to elevate their bottom line.
As a CHRO, naturally, you may be re-evaluating the tenacity of student loan repayment assistance benefits. It is wise to communicate to your workforce to take advantage of the benefit to see if they can get a part of their student loans wiped off under the relief.
Here are the next steps for corporate employees with Student debts:
Irrespective of the relief being applicable to your employees or not, organizations must continue efforts to help their workforce with student loan repayment assistance. Let me bring some facts to the fore and give you our perspective.
The above speak to the fact that student loan repayment assistance is a vital benefit, and an attractive recruitment and retention strategy.
The more I think of it, the more it gets clear that the fourth wheel or the missing cog in the puzzle to resolve the student debt crisis is the colleges themselves.
At Edcor, we have tried to address this systemic issue with the help of our Debt-free offerings from our school network partners. This is particularly helpful for client employees who have $5250 or above in annual tuition assistance. With the help of the employer’s annual tuition benefits and the discounts from schools, employees can fulfill their higher education goals with minimal or zero out-of-pocket costs leading to no debt once they finish their degree.
For clients offering tuition assistance and student loan repayment assistance, the amount of $5250 is tax-free and benefits above the limits may be taxed. Even though we are not tax experts, as an added service, Edcor can help calculate what it finally comes down to for organizations and their employees.
So, what are you waiting for? Let’s Future Together and Make your possible go further!
Adrienne Way, Owner and CEO, Edcor
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