ICYMI: federal student loan emergency payment suspension has been extended to May 1, 2022.
This announcement is a huge relief for the 43 million Americans whose federal student loans have been in forbearance since March 2020. Between recent student loan servicer shakeups, a still-unsteady economy amid the Covid-19 resurgence, and 90 percent of affected borrowers saying they’re not prepared to resume payments, ending the payment freeze as previously scheduled at the end of September was sure to be a painful transition.
But borrowers don’t just have an additional four months without federal student loan payments — they have four additional months to plan, to save, and to get ahead.
As an HR leader, here’s what you can do to help your employees put their best financial foot forward during these extra months of payment suspension:
Encourage employees to contact their student loan servicers.
Contacting their student loan servicer is the only way borrowers can confirm payment due date and any policy changes, as well as settle logistical matters like reconnecting a payment method for auto-pay or updating their address in the event of a recent move. Additionally, remind employees that if their servicer is FedLoan or Granite State — both of which have announced they won’t renew their student loan servicing contracts at the end of the year — that they should watch for updates from their servicer about how their loans will be transitioned to a new provider.
Help employees get on the best path forward.
Now is the optimal time for borrowers to explore their eligibility for new repayment plans and forgiveness programs. Employees from all industries may qualify for income-driven repayment plans, which could lower monthly payments and forgive outstanding debt after a certain number of years. Borrowers who work for a non-profit, government, or public service organization can qualify for Public Service Loan Forgiveness, which forgives remaining loans after ten years of qualifying payments. Sharing resources to help employees explore these options now could make all the difference when they resume payments in February.
Share ways employees can use the extension to get ahead on their financial goals.
It may sound counterintuitive, but for some borrowers, the suspension period is the perfect time to make student loan payments. That’s because the interest rate for federal student loans is still 0%, so any payments borrowers make apply directly to their principal — and that means becoming debt-free sooner. And if employees want to get ahead but don’t have room in their budgets, they can still leverage tools from FutureFuel.io like Giveback and Round Up to convert cash back rewards and spare change from everyday purchases into student loan contributions.
The payment freeze extension also frees up space for borrowers to get ahead on other financial goals. The average monthly student loan payment is $393 — but in some cases is as much as $2,000 — meaning that many borrowers are forced to delay other financial goals until their student debt is paid off. Millennial borrowers, in particular, face tough decisions when it comes to financial wellness:
- 41 percent delay retirement contributions
- 43 percent delay building emergency savings
- 42 percent delay other investments.
An added four months without monthly student loan payments weighing on their wallets could be the boost some borrowers need to pave the way for a better financial future.
Don’t leave out private student loan borrowers.
The payment freeze has only applied to federal student loans — and many private student loan borrowers have received little or no relief during the pandemic. As you help employees to navigate the remaining months of forbearance, don’t overlook opportunities to support employees with private loans too. For example, private student loan borrowers are often better candidates for options like refinancing, which can lower monthly payments and interest rates — and FutureFuel.io can help eligible employees compare prequalified refinancing options for free.
Take matters into your own hands.
The payment freeze may have been extended, but the Department of Education was clear that this will be the final addendum. Federal student loan payments will return, and when they do, demand for employer-sponsored assistance will be higher than ever before.
HR leaders should leverage the extended forbearance period to redesign their financial wellness programs to better support employees with student debt. Not only will implementing student debt benefits relieve what 80 percent of professionals say is a source of “significant” or “very significant” stress, but employers stand to:
- Recoup billions of dollars in lost productivity due to worrying about money on the job
- Retain 86 percent of employees for five or more years
- Unlock up to $5,250 in tax advantages per employee through repayment assistance
If you’d like to learn more about how FutureFuel.io can help you design a student debt benefits program that helps your employees prepare for May 1 and beyond, schedule a demo today. And for more tips on how employers can help their workforces get ready for the end of federal student loan suspension, check out our countdown resource center.