Supreme Court Ruling Leaves Student Loan Borrowers Looking for Help

As a result of the U.S. Supreme Court’s June 30 decision to reject President Joe Biden’s student loan forgiveness plan, American workers with student loan debt will soon begin to face additional financial pressure, as repayments are expected to resume in October. 

In turn, plan sponsors will likely face additional pressure to offer student loan benefits, if they do not already do so. 

Monica De Agostino, the human resources manager at MRIGlobal, a nonprofit scientific research institute in Kansas City, Missouri, said in an emailed statement that now is a pivotal moment for plan sponsors to “show up.”  

“With payments and interest resuming soon on federally held student loans, employees burdened with student debt face upcoming financial challenges,” De Agostino said. “As a plan sponsor, we have a unique opportunity to demonstrate our commitment to the financial wellness of our employees and alleviate the stress associated with student loans.” 

Biden’s debt relief plan would have forgiven $10,000 for non-Pell Grant recipients and $20,000 for Pell Grant recipients if they were earning less than $125,000 per year. In total, the order would have forgiven approximately $430 billion in student debt. At the same time, the Department of Education’s COVID-19 student loan forbearance program is ending: Interest accrual resumes on September 1, and payments will be due beginning in October. 

The research site EducationData.org estimates that 43.6 million people in the U.S. account for the $1.644 trillion in outstanding federal student loans. The average federal student loan balance is $37,717. 

Employer Student Loan Benefits Can Make a Difference 

Without relief, De Agostino said employees burdened with large student loans may soon become stressed out and overwhelmed. However, she said workplace benefits can serve as a “bright spot and a timely way to engage and retain employees.” 

At MRIGlobal, a nonprofit that qualifies for the Public Service Loan Forgiveness program, De Agostino explained that last year the organization rolled out a partnership with Savi, a digital platform dedicated to helping borrowers, to provide support and unlock savings for MRIGlobal employees. De Agostino said the partnership connects employees to Savi’s platform and to educational seminars to help them understand recent updates on federal student loan repayment policy, navigate options and make informed decisions about their student loans. 

“We have already seen success, with 19% of our employees enrolled and an average projected public service student loan forgiveness per member of $40,265,” De Agostino said. 

In addition, De Agostino argued that the ongoing student loan debate also means that employees are being more careful before enrolling in a graduate degree program. MRIGlobal reviewed its tuition assistance numbers and noticed that 90% of applications were related to graduate school. In response, the company reviewed and increased the amount provided for graduate school tuition assistance. 

“We recognize the importance of staying responsive to the evolving needs of our workforce,” De Agostino said. “Currently, we are reviewing the specific provisions from SECURE 2.0 and continually evaluating our benefits package to ensure it aligns with the needs of our workforce.” 

Jesse Moore, senior vice president and head of student debt at Fidelity Investments, said via email that many employers are taking advantage of the SECURE 2.0 Act of 2022 provision that enables plan sponsors to treat participants’ qualified student loan payments as matching contributions by adding the benefit once it is available for plan years beginning after December 31. 

“This will be a game-changing benefit for the industry, as plan sponsors will be able to rely on existing budgets to help those that previously may not have been able to afford to save and offer match contributions based on the employee’s student debt payments,” Moore said.  

Recent Fidelity data found that of recent college graduates taking advantage of the federal student loan repayment pause, nearly two in three admit to having no idea how they are going to start repaying their student loans once the emergency pause is lifted. Moore said this is concerning for individuals who may not be prepared for the impact on their budgets and may need to cut back on spending or savings goals to repay their debt.  

While limited tuition costs are a justification for taking a hardship withdrawal from a retirement plan, Moore explained that student debt payments are not. Alternatively, Moore said participants can take a plan loan to cover tuition or student debt payments. 

In 2021, Fidelity research found that 18% of its student debt tool users had an outstanding loan against their 401(k), and older generations with student debt were more likely to have a 401(k) loan.  

Older Adults Face Student Debt Too 

Achieve.com, a digital personal finance website affiliated with Bills.com LLC, similarly found that not only are Generation Z and Millennials burdened by student loan debt, but many Generation X adults are faced with paying off their children’s college loans. 

Gen X adults enrolled in Achieve.com’s debt resolution program have the largest student loan balances of any demographic, with an average of $53,156, according to the company’s analysis. Next in line are consumers ages 35 to 50, who have an average of $50,527 in student loan debt, and consumers aged 65 and older, with an average student loan debt of $46,131. 

“While student loan debt is often framed as a financial challenge for younger generations, this highlights the reality that many parents and grandparents are more burdened with this debt, as they cosign student loans for children and other family members,” an Achieve report stated. “It can also greatly impact their path to retirement down the line.” 

De Agostino recommended that plan sponsors assess their employees’ needs by conducting surveys or gathering feedback to understand the level of student loan burden in their workforce. She also advised plan sponsors to collaborate with reputable organizations, like Savi, that specialize in student loan support. 

Hosting financial education sessions, webinars or workshops that cover student loans are useful for participants as well, and De Agostino said it is important to continually assess the effectiveness of these programs. She encourages plan sponsors to “stay agile and responsive” to ensure that the programs they offer remain relevant and impactful.