Employee Benefits

2020 Election Puts Spotlight on New Approaches to Student Loan Repayment

Successful young woman in modern office working on laptop looking at candidate profiles for the 2020 election.

As the 2020 election heats up, candidates voice their proposed plans for dealing with the 44 million borrowers who owe $1.6 trillion in student loan debt. Questions of financial balance are at the heart of the debate. Do students have the right to affordable higher education? Are taxpayers, government entities, institutes of higher education, and employers responsible for helping students receive it? Here are some of the issues.

Debt Cancellation 

The idea of wiping out all, or some, of borrowers’ existing student loan debt is proposed as a way to increase buying power. It also could stimulate economic activity and benefit the larger economy. But is it just a 2020 election campaign promise to get voters? Some propose tying the amount of debt cancelled to a borrower’s income level. Questions of fairness, and the costs associated with these plans, remain unanswered.

Help with Debt Repayment

Debt repayment relief – and responsibility for who should provide it – is a conversation that will continue well beyond the 2020 election.

Discharging Student Loans in Bankruptcy

Several candidates – including those from opposing parties – have proposed a change that would allow student loans to be included in bankruptcy.

Loan Forgiveness

Some presidential hopefuls are calling for a restructure or expansion of Public Service Loan Forgiveness (PSLF). This would provide additional relief to all federal loan types rather than just Direct Loans. Still, others propose eliminating PSLF. Several states offer other types of loan forgiveness. These are based on criteria such as working in rural areas or with underserved populations. Some 2020 candidates favor expanding these.

Changes to Income-Driven Repayment (IDR) Plans

Candidates on both sides of the aisle would like to simplify these plans. Some would like to maintain the length of time borrowers make payments before their loans are forgiven. And, they would decrease the percentage of borrower income required to pay during that time. Other candidates would like to increase the percentage of borrower income slightly. But, they would reduce the number of years for repayment until loan forgiveness occurs. Whose 2020 election pitch will win the most voters?

More Favorable Federal Financing Options

Some suggest that federal student loan rates should be lower, and origination fees should be eliminated. The argument is that the federal government should not be allowed to make a profit on student loans. Voters with student loans are looking forward to this issue getting resolved in the 2020 election.

Employee Benefit Programs

With student loan relief programs, employers are choosing to repay certain types of student loans. These options include flexible benefits and employee incentive programs. As solutions to the student loan debt issue are explored, employer student loan assistance may play a larger role in workplace perks. It’s a great way to attract talented workers who need help paying off student loans.

The Future of Higher Education 

Candidates also have proposed changes to higher education itself. This includes how it is funded, and who bears the responsibility for funding it.

Free College

While there’s been a call for free college for all in a few 2020 election speeches, some believe it should only apply to community college. Others would offer it based on financial need. The entire concept is unpopular with some. There’s no federal free college program, or clear vision for how that would work. There are states that offer free tuition at many public colleges. And, some believe doing this for all state and community colleges and technical schools is a good idea. Plans for increasing financial aid, so students don’t need to borrow to attend public college, also is on the table.

Streamlining the Free Application for Federal Student Aid (FAFSA)

Many low-income and first-generation students miss out on billions in Pell Grant aid because the FAFSA is so complicated. Increasing Pell Grants to reduce borrowing could help many students access education, say some candidates. Streamlining the FAFSA process could help, too.

Employer-Assisted Training and Education

Encouraging and destigmatizing vocational training and employer-sponsored education also is vital to worker survival. It seems like having a traditional college education is the only way to secure future financial well-being. But at what cost? This is another topic that is being discussed while gearing up for the 2020 election.

Employer Student Loan Repayment

Smart businesses today acknowledge the critical need to address student loan debt for prospective and current employees. Offering to help pay back student loans is an excellent workplace perk and employee retention strategy. Companies can provide employer student loan assistance by offering Employee Choice. Designed to use funds employers have already set aside for 401(k) matching contributions, it’s offered exclusively by BenefitEd and Ameritas. Employers don’t have to wait until the results of the 2020 election.

Employee Choice allows employers to stretch their benefits budgets. It works because employers don’t need to adjust the budget they’ve already set aside for matching contributions. Employees can apply unused matching dollars to help repay their student loans. Or, they can split matching funds between student loan debt and retirement.

Put BenefitEd and Employee Choice programs to work for your employees. Start by visiting www.youbenefited.com.

Sources:
Forbes
NerdWallet 

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