Communicating with Participants About Student Loan Payment Resumption

After a three-year reprieve, about 44 million Americans with student debt will be required to start paying off their federal student loans once again, as interest will start accruing on education loans on September 1, with payments set to resume in October. 

As employees with student debt will now potentially put saving for retirement on the backburner, plan sponsors have an opportunity to help participants through frequent and effective communication, as well as offering student loan benefits, according to industry experts. 

A recent study conducted by Empower found that one in three households expect their federal student loan payments to total at least $1,000 each month, and 42% of Americans said they will consider curtailing retirement savings as they are faced with this additional financial burden. 

Last week, the White House put further emphasis on student loan debt with the official launch of the Saving on Valuable Education plan, which is an income-drive repayment plan that calculates payments based on a borrower’s income and family size and forgives remaining balances after a certain number of years.  

The SAVE plan intends to cut many borrowers’ monthly payments to zero, save other borrowers around $1,000 per year and prevent balances from growing because of unpaid interest. Again, this program is something that plan sponsors may want to highlight as a forgiveness option to their employee base. 

Communication Strategies 

Megan Yost, senior vice president and engagement strategist at Segal Benz, says for plan sponsors who provide a benefit that helps employees pay down student loans, now is the perfect time to remind employees about this benefit. 

“Because people are busy and have different learning styles, we recommend using several different types of media to spread the word,” Yost says. “You’ll also want to consider where people work and if they have access to email during the day. Whether you provide talking points to managers, hang posters in breakrooms, or send a message through an instant messaging program, be sure your communications direct people to one place for more information—ideally a benefits website that’s not password protected.” 

Yost says plan sponsors should begin reminding participants in September that their payments will resume in October. Plan sponsors can determine the frequency of these communications by considering their workforce demographics and evaluating their overall calendar of benefits communications, according to Yost.   

“If you’re encouraging people to enroll in a student loan repayment program, they’ll want more details about how the program works before signing up,” Yost says. “Some people may prefer to read this information while others may prefer to listen to a webinar or watch a video.” 

Because employers tend to send a lot of communications about benefits in the fall to promote open enrollment, Yost suggests cross-promoting student loan repayment programs with information about upcoming benefit changes when people are considering which benefits to elect for 2024.  

Anne Lester, an education fellow at Alliance for Lifetime Income and formerly the head of retirement solutions at J.P. Morgan, says if plan sponsors are planning to implement the student loan matching provision in SECURE 2.0, now would also be the ideal time to communicate this to participants. 

The optional provision allows employers to offer a 401(k), 403(b), 457(b) and SIMPLE IRA contributions if the participant elects to pay down student loans instead of contributing to a retirement plan. This option would be available starting after December 31, 2023. 

Collaborate with Recordkeeper 

Lester recommends that plan sponsors work with their recordkeeper to determine how much of their population is actually paying down student loans. She says this will help to target communications to specific segments.  

Plan sponsors can also ask their recordkeepers to provide data on changes in participation rates after employees begin to start paying off their student loans, Lester suggests. This data could help plan sponsors better determine who in their population is most affected by student loan debt and, again, improve their communications.  

Rachel Weker, senior retirement strategist in the retirement plan services division at T. Rowe Price, said the company is partnering with plan sponsors to share timely updates, articles and other resources with participants on a section of their participant portal that is dedicated to student loan information at this time. 

“Plan sponsors have a unique opportunity to assist employees and help to reduce their student loan stress,” Weker said in an emailed response.

Weker suggested that plan sponsors can partner with an online financial wellness program, such as SmartDollar, to offer further educational guidance to their employees. Creating room in an individual’s budget to absorb the student loan repayments will be critical to both the overall financial health of the employee and plan health of their retirement plan, neutralizing the potential for decreases in salary deferrals and increases in loans/withdrawals.” 

Through T. Rowe’s partnership with SoFi, Weker said plan sponsors can offer additional student loan assistance to their employees by contracting with SoFi to offer debt management, live financial coaching, employer contributions direct to the student loan and/or student loan match to the retirement plan.  

Lester adds that using multimedia channels of communication is also key. 

“I think storytelling and videos from people that their target audience is going to see as their trusted adviser are going to be the most powerful, and slapping out another brochure via email is not terrible … but I don’t think that [communication] tends to resonate very much,” Lester says.