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How COVID-19 Impacts Your Student Loans

How COVID-19 Impacts Your Student Loans

by | Mar 27, 2020 | Blog

How COVID-19 impacts your student loans. What you need to know about the new federal freeze on student loan interest and student loan payments.

Following action taken by the Federal government in response to the 2020 COVID-19 pandemic, federal student loan borrowers no longer need to take any action to suspend payments — your federal loan servicer will freeze them automatically. There are some student loans that are not eligible for this automatic suspension, including federal student loans under the Federal Family Education Loan (FFEL) Program loans that are owned by commercial lenders, select Perkins Loans held by the institution you attended and private student loans.

If you have private student loans, reach out to your loan server if you are in need because you have to continue paying principal and interest.

For more details regarding federally held student loans and whether or not your loans qualify for forbearance, refer to StudentAid.gov. 

How COVID-19 Impacts Your Student Loans

While there may have been many headlines about freezing student loan payments over the past few months, the process of halting student loans is not as simple as a headline would make it appear. There have been multiple changes over the course of March, 2020 that affect borrowers and loan suspension.  

In early March 2020, the Trump administration announced that Federal Student Loan Interest rates will be reduced to 0 percent for a period of 60 days beginning March 13, 2020. Later that month, the federal government announced individuals can suspend their payments for a period of 60 days if they request it. Then, at the end of March, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, provided the automatic suspension of principal and interest payments on federally-held student loans through September 30, 2020.  

“The biggest problem is that the media is making it sound like all you have to do is stop making your payments,” said Joel Carter, spokesperson for student loan company GotZoom. “But, then you’ll be reported as paying late. What you need to do is contact your loan servicer and request forbearance.” 

According to a Department of Education press release from March 20, U.S Secretary of Education Betsy DeVos commanded all federal loan services to grant an administrative forbearance to any borrower with a federally held loan who requests one.

This process is open to all loan holders — both active and in default — and based solely on request and not on the typical administrative approval process. Borrowers have to contact their loan servicers to request the payment freeze. There is no clear response time for these requests.

What to Think About Before Requesting a Payment Freeze

Before deciding to use this new process, borrowers must consider their situations to make the best decision for themselves. For some, it might make sense to continue to make payments. 

Those who are in stable financial situations in the short term might consider continuing their payments as any payment conducted during the 60-day time period will be applied directly to the loan’s principle. For them, paying could speed up their loan paying process.  

Participants in the Public Service Loan Forgiveness program, who are required to make 120 payments before the loan is forgiven, might also consider making payments. 

More on Topics Related to How COVID-19 Impacts Your Student Loans

COVID-19 Support Resources: What to Know

Coronavirus 2020: Effectively Working from Home

5 Ways to Prepare for a Recession

Coronavirus and Financial Stress March 2020

Coronavirus and Financial Stress: How Will Employees React?

How Will the Coronavirus Impact Your Business?

How Bad Is the Student Loan Crisis?

How Bad Is the Student Loan Crisis?

by | Mar 5, 2019 | Blog

How bad is the student loan crisis? Student loan assistance is becoming a popular employee benefit for employers who want to help workers reduce financial stress from student loan debt. 

Over 70 percent of Millennials say they’ve delayed decisions like buying a home or having children because of their student loan debt, according to a recent survey by Bankrate.

“There’s a huge toll being taken on individuals and the U.S. economy from the growing burden of student loan debt,” said Bankrate’s Senior Economic Analyst Mark Hamrick. “For the huge slice of the American population with debt, it is necessary to juggle competing goals including saving for emergencies and retirement as well as major life decisions.”

Student Loan Debt Regret

Nearly 80 percent of Millennials would have approached their college finances differently in hindsight. More than half of Millennials would have applied for more scholarships than they did. Others would have attended a cheaper university, opted for community college or trade school, or majored in a different field.

“Many families are now striking out to investigate college campuses as they begin studies this fall,” said Hamrick. “For those prospective students and their families, many of who will help them to pay for their secondary education, we’d urge them to investigate all possible options for financial aid including scholarships to limit their borrowing.” He goes on to suggest: “Their options also include attending a lower-cost school such as those in-state as well as more economical trade schools and community colleges.”

Families can help children approaching college make better decisions about student loans now, but what about the Americans splitting the $1.5 trillion in student loan debt the U.S. has already generated who aren’t meeting milestones or saving for retirement?

Employee Student Loan Assistance 

Employers are coming up with solutions to help employees pay down student loan debt and get back on track with saving for retirement. Some companies are allowing workers to transfer up to five days of paid time off for payments against student loan debt. Other programs offer student loan refinancing or allow employers to match employee 401(k) contributions with student loan repayments.  

Lawmakers are working to expand existing legislation that allows companies to offer up to $5,250 in tax-free tuition reimbursements to include $5,250 in tax-free student debt relief for workers in an attempt to further motivate employers to offer student loan assistance benefits.

Student loan debt assistance is still a new benefits offering, but it’s developing rapidly to meet the need to address the $1.5 trillion issue that’s stressing Americans out and keeping them from financial security.

More on Employee Student Loan Debt:

Employee Student Loan Debt: 10 Things You Need To Know, Part One

Employee Student Loan Debt: 10 Things You Need To Know, Part Two

Student Debt Financial Stress Haunts Millennials and Older Workers, Too

What Tops Financial Stress for Employees?

The Student Debt Crisis is Growing and Affecting Your Workforce. What Can You Do?

Employee Student Loan Debt: 10 Things You Need To Know, Part Two

Employee Student Loan Debt: 10 Things You Need To Know, Part Two

by | Jan 30, 2018 | Blog

Employee student loan debt: 10 things you need to know, part two. The student loan debt crisis isn’t going away. This is what employers need to know about it.

This article is the second part of a series on 10 Things Employers Need to Know About Student Loan Debt. Catch up with Part One, here.

Americans owe a combined $1.4 trillion in student loan debt — and employers are starting to feel the burden of that enormous debt. The vast majority of employees are financially stressed, and they are less focused, less engaged and less productive than those without debt and are more likely to take one a second job or skip work due to a stress-related illness.

The student loan debt crisis isn’t going away, but there are ways you help your employees cope with their financial stress and get back to work. Here are 10 important things you need to know about student loan debt and the struggle your employees are facing in paying it back:

6. Student loan debt is not a millennials-only problem.

Younger employees aren’t the only ones dealing with the stress of student loan debt. In fact, 2.8 million Americans aged 60 and older carry outstanding student loans from their own college education. This number is up significantly from 2005, where only 700,000 Americans in this age group carried outstanding loans. Your older employees may be struggling to repay debt from continuing education or are possibly paying off debt from sending a child or grandchild to school.

7. Stress over student loan debt is keeping your employees from major life milestones.

Millennials graduating with student loans are more interested in paying off their loan debt than they are in homeownership, getting married or having children. A study by the Federal Reserve Bank of New York has found that having student loan debt decreases homeownership at every level of higher education. Indebted millennials also less likely to set aside money for retirement or build an emergency fund, creating further vulnerability, possible additional financial debt and significant stress into the future.

8. Stress over student loan debt is making your employees sick.

Over half of young workers with student loan debt worry about it constantly, according to American Student Assistance, a nonprofit specializing in helping consumers finance their higher education. Stressing about massive debt isn’t just an emotional strain, it can also cause significant physical ailments from occasional headaches or gastrointestinal problems, to more chronic conditions such as high blood pressure or depression and anxiety.

9. Most employees wish they had more information about repaying student loan debt, they just don’t know where to look.

Repayment options for student loan debt are often complicated and difficult for consumers to navigate on their own. With private loans, interest rates and monthly payments can change with little to no warning. Certain options, like consolidation or forgiveness, often requires knowledge of how to make negotiations with whoever holds the loan. Don’t let your employees feel overwhelmed by their debt – employers hold a unique ability to help their employees manage their student loan debt and help build their financial literacy.

10. Most employees want their employers to provide them with resources on student loan debt.

Employees already rely on their Human Resources departments for information on workplace safety, benefits and managing retirement plans. Increasingly, they are looking to their employer and HR team to provide debt counseling, financial tools and management options and overall financial wellness. By offering debt counseling and financial literacy services, you show your employees that you understand the financial challenges they face paying back student debt and are invested in their wellbeing. Your employees will not only feel happier to work for an employer who cares about their wellness; as their financial wellbeing grows and their student loan debt decreases, your employees will be healthier, more present, more productive, and ready stick with your company for the long term.

Financial literacy and financial planning are key to reducing financial stress, student loan debt and creating financial wellness. The first step, however, is knowing how to get there. For your employees, student loan debt affects their ability to plan for the future and build productive and meaningful relationships. For employers, it means being able to attract and hold on to talented employees. Consider who in your workforce might be affected by significant student loan debt. The cost of a higher education shouldn’t cost your company a good work force and it shouldn’t hold your employees back from planning their future.

To get the complete picture about student loan debt and your employees, be sure to read Part One of this article here.

More on Student Loan Debt and Financial Stress

Employee Student Loan Debt: 10 Things You Need To Know, Part One

Employee Student Loan Debt: 10 Things You Need To Know, Part Two

Student Debt Financial Stress Haunts Millennials and Older Workers, Too

What Tops Financial Stress for Employees?

The Student Debt Crisis is Growing and Affecting Your Workforce. What Can You Do?

Employee Student Loan Debt: 10 Things You Need To Know, Part One

Employee Student Loan Debt: 10 Things You Need To Know, Part One

by | Jan 29, 2018 | Blog

Employee student loan debt: 10 things you need to know, part one. What employers need to know about how student loan debt affects their employees.

The U.S. has a student loan debt crisis. And employers are paying the price.

Over 44 million Americans are carrying a total of $1.48 trillion in student loans. Forty percent of adults under 30 and 16 percent of adults overall live with outstanding student loan debt, according to the federal reserve’s 2017 Survey of Household Economics and Decisionmaking.

Chances are, your employees are among those affected. Employees facing significant student loan debt are more likely to defer saving for retirement, buying a home, getting married and having children. They’re also more likely to seek out a second full-time or part-time job to cover their expenses. As a result, their concentration, productivity and overall physical health suffers from the accumulated financial stress.

The financial cost of higher education is only increasing with time, matriculating well-educated, inexperienced and deeply indebted graduates into the workforce. In this two-part series, we offer you 10 things you should know about how student loan debt affects your employees:

1. Student loan debt is the second-biggest type of personal debt in the United States.

Student loans are one of the largest contributors to overall household debt among Americans, second only to mortgage debt. While the overwhelming majority of those loans are federally held, there has been an increase in borrowing from private lenders. Private student loans are ineligible for loan forgiveness programs or income-based repayment programs, complicating repayment plans and decisions on where (and how) to seek debt relief.

2. The amount of student loan debt Americans owe is getting worse with time.

In February of 2017, the Federal Reserve Bank of New York announced that student loan debt had grown for the 18th consecutive year and that the amount borrowed doubled in the last eight years, reaching a total more than $1.48 trillion owed. Not only are more students are taking loans for higher amounts but they are paying them back at a slower pace than in the past.

3. Student loan debt is affecting your workforce.

Sixty-eight percent of all new college graduates have student debt. Even if your employees don’t have significant amounts of student debt themselves (which is a relative assessment), they’re likely to have friends or relatives who do. Student loan repayment plans average at $351 per month and that number isn’t going down any time soon. It’s important to note that the average annual US salary for 24 to 35 year olds is $39,000. Student loan repayments are killing your employees’ financial wellness and are averaging nearly 10 percent of their income, replacing retirement contributions, mortgage payments and possibly even monthly health insurance costs.

4. The average debt per student has risen to nearly $30,000.

One fifth of graduated student loan recipients aged 25-39 take on extra employment in order to make payments on their student loan debt. Employees working a second job can mean lower productivity while at work and a difficulty in maintaining a reliable work schedule. Overworked employees are also more likely to experience fatigue and burnout from the added stress of juggling multiple jobs – as well as the stress from their student loan debt.

5. The average interest rate per student loan is approximately 5 percent, meaning your employees actually end up paying back significantly more than what they borrowed.

The interest rate paid by a loan recipient is dependent upon which type of loan and repayment plan that they have been given. For federal loans, the current amount for direct subsidized and unsubsidized (the type provided to undergraduates) loans is 4.45 percent. At the graduate level, the interest rate is 6 percent. For people 60 and over who take out loans to help younger relatives, the rate is 7 percent. Private student loans carry interest rates averaging 9 to 12 percent. Depending on the repayment or consolidation plans, these high interest rates can quickly inflate the initial amount of the loan and add tens of thousands of dollars to what an individual is trying to repay. And, interest and late fees are paid before any monthly payments are applied to the original loan amount.

And there’s even more you need to know. To learn more about student loan debt and your employees, be sure to read Part Two of this article here.

More on Student Loans and Financial Stress

Employee Student Loan Debt: 10 Things You Need To Know, Part One

Employee Student Loan Debt: 10 Things You Need To Know, Part Two

Student Debt Financial Stress Haunts Millennials and Older Workers, Too

What Tops Financial Stress for Employees?

The Student Debt Crisis is Growing and Affecting Your Workforce. What Can You Do?

Student Loan Repayment Employee Benefits: Congress to the Rescue

Student Loan Repayment Employee Benefits: Congress to the Rescue

by | Apr 5, 2017 | Blog

In this week’s Best Money Moves roundup, we take a look at news stories and new research studies that may impact employee benefits and HR issues. We hope you find this news roundup helpful, and we’d love your feedback.

Student loan repayment assistance is the hottest employee benefit of 2017. Employers already know their employees are struggling with student loan repayment and many offer repayment assistance as an employee benefit.

Now Congress is leaning in to help. A soon-to-be-introduced Senate bill would amend the IRS code to add a tax break for employers’ contributions to student loan payments, like the existing tax exemption for employer contributions to their employees’ education costs. A similar bill was introduced in the House of Representatives last month and has strong support from 46 co-sponsors from 16 states.

Here’s how this new tax benefit would help employers and their financially-stressed employees.

Which employee benefits do your workers want? Perks are an integral part of any employee retention plan, but how do you know if you’re investing your benefits budget in the right places? According to a Gallup survey, these are the 11 benefits workers want most.

Retaining Millennial employees is trickier than attracting them to your company in the first place. If you want to hold onto them, you have to understand why they head for the door. Understanding the Millennial mindset.

Are your employees struggling to manage their finances? A few quick reminders from employers can help. Try these three simple budget saves.

Most workers hope their next job change will be to a better position with higher pay, but that’s not always the case. University of Michigan researchers found that older workers who make a late-life job change find themselves in a lower-status version of the work they were already doing. But that’s not always a bad thing.

What workplace stressor hurts your employees most? A recent survey by Paychex found that more than half of employees stress about working overtime and the impact on their families. Long or erratic hours, lack of control and lack of resources also made the list.

Company values and vision are important to creating a workplace that retains employees. That’s why making sure your candidate shares your company’s values and vision before you hire them reduces the chances they’ll leave.

New hires are also more likely to leave when they find the job doesn’t fit their expectations. New employee onboarding programs help new employees understand their position and company and reduces their desire to leave. How to provide a more accurate picture of the position.

Employees are less likely to leave if they feel their efforts are recognized and appreciated. That makes employee recognition programs essential to keep turnover – and the costs associated with it – to a minimum. These are the three pillars to effective employee recognition.

Your employees may not plan to retire when you think they will. A new survey from CareerBuilder found that half of workers aged 60 or older either don’t plan to retire until at least age 70 or don’t think they’ll retire at all. Here’s why they’re staying in the workforce.

 

Have something to add? Email info@bestmoneymoves.com.

It’s hard to stay on top of everything in the news. That’s why each week our Best Money Moves newsroom will bring you the most important news in financial wellness, employee benefits and financial stress. We hope you like the information and, if you do, please spread the word. For midweek developments, follow us on Twitter and on Facebook.