PLANSPONSOR - February/March 2021 - 2

INSIGHTS
PUBLISHER: Alison Cooke Mintzer
alison.mintzer@issmediasolutions.com
Student Debt Relief
M
y family's-i.e., my parents' and my siblings' and
our spouses'-group chat recently took up the subject
of student loan debt, in light of the proposal by
some Democratic House representatives to forgive $50,000 in
student loans. So many financial security issues have arisen
due to the continuing pandemic and potential K-shaped
recovery, but student loan debt is one that transcends the pandemic.
We at PLANSPONSOR know what a major issue student debt is, as we report
research findings and see employers start to find ways to help employees attack the
nearly $1.6 trillion balance.
Both private and public college costs have risen by double-digit percentages,
while American household earnings and overall household wealth have declined
compared with prior generations.
The Millennial generation is the most educated in history, perhaps because
higher learning seemed their only way to get ahead, as wages declined and household
wealth shrank-you can see this in economic data. Wages have stagnated over time-
and job benefits such as health insurance have grown more expensive-despite gains
in worker productivity, so it's harder to grow assets plus save and pay back loans.
A college degree is still seen as " worth it " financially because the average wages
for those with only a high school diploma keep falling-clear when you read any
article about the push to increase the minimum wage. PWC reports that four in 10
Millennial employees have student debt, with nearly three-quarters saying it affects
their ability to meet other financial goals.
There are implications for both the government and employers. One is the issue
of interest accrual-for those facing years of post-secondary education, how much
would the student be helped if his loans didn't accrue interest until he graduated?
Or if the government could keep loans at lower interest rates during his period of
study? There are also differences between public and private loans as to how they are
structured and dispersed; if both types could be reviewed to present them with parity,
people could more easily navigate the system. Interest rates on student loans overall
warrant a review. Consider that, despite Millennials' challenges, of the Baby Boomers
and Generation Xers who have student debt, their amount outstanding averages
more than Millennials'. In fact, of the $1.566 billion in student loan debt held by the
federal government, the U.S. Department of Education reports 18.6% of borrowers,
who hold 22% of all debt, are over age 50. The average debt for those between 50 and
61 is over $42,000, and for those over 62, it's still more than $38,000.
Some companies realize how big an issue it is to have employees carrying this
debt and the financial stress it adds; the government, through legislative and regulatory
action, is providing incentives to help. Last year's Coronavirus Aid, Relief and
Economic Security (CARES) Act allowed for employers to contribute $5,250 per year
tax-free (later extended through 2025) toward each employee's student loan/s. In 2018,
Abbott Laboratories received a private letter ruling letting workers stay eligible for
their plan's match while repaying their loans; other companies have filed for similar
programs. New firms are springing up, too, to help employers roll out new versions
of a student loan benefit-we write about them, as well as employer programs regularly.
As plans develop, we'll see if such features become core, giving these struggling
workers a chance to save for retirement. -Alison Cooke Mintzer, Publisher
2 PLANSPONSOR.COM February - March 2021
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