Employees of Religiously Affiliated Organizations Qualify for Student Loan Forgiveness Program

Employers can educate employees about new regulations issued in response to a Supreme Court decision.

In response to the U.S. Supreme Court decision in Trinity Lutheran Church of Columbia Inc. v. Comer, the Department of Education has amended regulations regarding the eligibility of faith-based entities to participate in the Federal Student Aid programs authorized under Title IV of the Higher Education Act (HEA) of 1965 and the eligibility of students to obtain certain benefits under those programs.

Among other things, this means that starting July 1, employees at nonprofit organizations affiliated with religious entities qualify for the federal public service loan forgiveness (PSLF) program.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

Some employers offering student loan repayment benefits educate employees about loan forgiveness programs or connect them with someone who can help. To aid nonprofit employers in their efforts , together with Savi, TIAA recently launched a program that helps employees reduce their monthly payments and qualify over time for the PSLF program.

The Supreme Court case referenced in the Department of Education’s new regulations involved a licensed preschool and daycare center that was initially opened as a nonprofit corporation but merged with Trinity Lutheran Church of Columbia in 1985. The preschool applied for a Playground Scrap Tire Surface Material Grant offered by the Missouri Department of Natural Resources but was denied because of a section of the Missouri Constitution that states, “no money shall ever be taken from the public treasury, directly or indirectly, in aid of any church, section or denomination of religion.”

Trinity sued, arguing that the denial of its application violated the equal protection clause of the 14th Amendment as well as the First Amendment’s protections of freedom of religion and speech, according to LexisNexis.

Lower courts ruled in favor of the Missouri Department of Natural Resources. However, the Supreme Court held that the department violated a church’s rights under the free exercise clause of the First Amendment. The high court said the department’s policy discriminated against otherwise eligible recipients by disqualifying them from a public benefit solely because of their religious character and, in doing so, imposed a penalty on the free exercise of religion.

Among other things, the Department of Education’s new regulations:

  • Restore the ability of members of religious orders, who also are pursuing courses of study at institutions of higher education, to participate in the Title IV programs by eliminating regulatory provisions that treat members of religious orders as having no financial need in certain circumstances;
  • Allow certain borrowers, who serve as full-time volunteers in tax-exempt organizations and give religious instruction, conduct worship service, proselytize or fundraise to support religious activities as part of their official duties, to defer repayment of Federal Perkins Loans, National Direct Student Loans (NDSLs) and Federal Family Education Loan Program (FFEL) loans; and
  • Provide an interpretation of the PSLF regulations that permits borrowers who work for employers that engage in religious instruction, worship services or proselytizing to qualify for PSLF.

In a “Student Loan Tip Sheet,” Savi says, “Given how PSLF works, student loan borrowers will be able to retroactively count previous years of employment for religious organizations toward the service requirement for the program—meaning eligible borrowers could get forgiveness on their loans in a matter of weeks.”

Principal Renews Focus on Retirement Plans, Asset Management

Participant experience will continue to be an integral focus, and it will continue to pursue digital solutions, the firm said.

Following a strategic review, Principal Financial Group has renewed its focus on the small to medium-sized business (SMB) market.

Principal says it will fully exit U.S. retail fixed annuities—discontinuing new sales of its deferred annuities, payout annuities and indexed annuities. The firm will continue selling its variable annuity offering, which it says plays an important role within its complete suite of retirement solutions.

Get more!  Sign up for PLANSPONSOR newsletters.

“Our go-forward plan includes expanding emphasis on fee-based businesses and focus on three key areas—retirement in the U.S. and emerging markets, global asset management, and U.S. specialty benefits and protection in the small to medium-sized business market,” a spokesperson said. “Principal is an expert in the SMB market and a leader in providing comprehensive benefits packages to our customers, with business owners and key executives being a strategic focus for us for more than 10 years.”

The firm will continue to offer group benefits for employees and life and disability insurance products for business owners.

Principal, which acquired Wells Fargo’s retirement plans business in 2019, ranked as the No. 5 recordkeeper by total 401(k) assets in the most recent PLANSPONSOR Recordkeeping Survey. For plans with $10 million to $100 million in assets, it ranked No. 4.

“We will continue to grow our U.S. retirement franchise, which we have doubled in the last three years with the integration of Wells Fargo Institutional Retirement & Trust,” the spokesperson said. “We’ll invest in key differentiated and integrated offerings like our Total Retirement Solutions that provide us unmatched breadth and depth for our retirement customers. Participant experience will continue to be an integral focus for us, with strong plan design and financial wellness support that creates the best outcomes for our participants. We will also pursue digital solutions, such as Principal SimpleInvest, our digital IRA [individual retirement account] and advice offering, and our mobile apps that make it easier for customers to do business with us on their terms. We’ll consider the learnings of this review as we continue to evolve our strategy, portfolio and go-to-market approach to allow us to grow and create value.”

Principal also has a strong nonqualified deferred compensation (NQDC) plan business, ranking No. 4 by total 409A NQDC plan liabilities in the PLANSPONSOR Recordkeeping Survey.

“As a part of our Total Retirement Solutions, NQDC is truly a competitive differentiator for Principal. It’s an appealing key employee benefit that is also versatile, flexible, tax attractive and works for many companies,” the spokesperson said. “We will continue to support business owners and key executives, allowing for an even sharper focus on the business market and products with limited interest rate exposure.”

Dan Houston, chairman, president and CEO of Principal, said in an announcement about the results of the strategic review, “This thorough and intensive review considered strategic fit, client needs, financial impact and the risk profile of our business lines. We identified opportunities to reduce complexity and risk, improve our return profile, and increase our cash flow conversion to better enable us to execute on our strategy, reinvest in growth and support our financial strength.”

«