“student Loans And Retirement: How Debt Affects Long-term Financial Planning” – The financial stress of student loan debt affects the physical and mental health and productivity of employees, and your social impact or bottom line. Secure 2.0 makes it easier for employers to help employees invest in their retirement and pay off student loan debt.
Nearly 43 million people, or one in six adults, in the US have federal student loan debt, which now exceeds $1.6 trillion.
“student Loans And Retirement: How Debt Affects Long-term Financial Planning”
Among our TrustPlus clients since the beginning of 2021, 47% have student loan debt, with a median loan balance of $36,717.
Don’t Let Student Loan Debt Hurt Your Retirement (aug. 2023)
The financial stress of student loan debt affects the physical and mental health and productivity of employees, and your social impact or bottom line.
It often forces them to choose between investing in their retirement now or paying the cost of their education: The median monthly payment for federal borrowers is $250, according to the Education Data Initiative.
It is a toxic choice considering the nature of the increasing interest over time, your employees’ prospects for a secure financial future, and the success of your business or organization in the years to come.
Student loan interest will resume starting on September 1, 2023, and payments will be due starting in October according to the US Department of Education.
Coping With Student Loans In Retirement
We wrote about what employees with student loan debt should do to prepare here. Spoiler alert: call your servicer now to discuss your situation if you’re worried about being able to make payments.
As your employees with student loan debt prepare to make payments again it’s a good time to take a closer look at a few key provisions in Secure 2.0 designed to help employees manage their student loan debt and payments , including through defined contribution scheme benefits.
When student loan debt prevents your employees from contributing to defined contribution (DC) retirement plans, they miss out on your employer’s matching contributions, and you’re left with unfulfilled potential for the benefits you already have. offer.
Secure 2.0 which became law in December helps. Under the new law, sponsors of 401(k), 403(b), governmental 457(b) plans, and savings incentive matching plans for employees of small employers (SIMPLE plans) can make matching contributions to employees’ qualified student loan payments (QSLPs ) as if they were pre-tax, Roth or after-tax contributions.
Can You Save For Retirement While Paying Off Student Loan Debt?
For plan years beginning after December 31, 2023, employers can offer the QSLP match even if employees do not contribute to a plan, making it possible for employers to eliminate the toxic choice that workers often make it between investing in retirement and paying down student loan debt. .
Section 102 of SECURE 2.0 offers a huge incentive for small businesses to offer retirement plans. The three-year small business start-up credit increased from 50% of administrative costs to 100% for employers with up to 50 employees, up to a maximum of $5,000, and such small businesses can receive an additional credit of up to $1 , 000 per employee per year.
On June 30, the Supreme Court ruled against the Biden administration’s $400 billion plan to cancel student loan debt, but President Biden said he was going to try again, this time citing authority under the Higher Education Act of 1965.
The process will take several months, best case, and it is crazy how many borrowers will qualify for relief under whatever schemes are proposed and how the schemes themselves will fare under inevitable legal scrutiny.
American Retirement Initiative
What is important to know is that interest starts accruing again on September 1 and payments will be due again starting October 1.
Borrowers who are unable to pay immediately will have options under a 12-month “on-ramp” repayment program which allows borrowers with late, missed or partial payments not to be considered delinquent, to report them to the credit bureaus, placed in default or referred. to collection agencies. “Borrowers do not need to take any action to qualify. The period runs from October 1, 2023, to September 30, 2024.”
For your employees with student debt the clock is ticking. Secure 2.0 can help turn student loan and time payments into an asset for your employees and your organization.
As Stacey MacPhetres, senior director of education finance at Bright Horizons – which offers childcare, aged care, education and careers to more than 1,000 of the world’s top employers – tells Insider, “Employers are either’ n know about it and want to know exactly what they need to do to get queued up, or they don’t know about it.”
Employers Target Student Loan Debt To Boost Retirement
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Paying Your Student Loans Could Help You Save For Retirement
I asked ChatGPT How to Win $1000 Online. Peeking in the boat mind can be very useful, but it can also be so silly it’s funny During a recent Practice Progress webinar held earlier this week, three industry experts offered their insights about the employer’s perspective and the employee on student loan debt, and discussed how debt affects financial well-being and retirement planning.
The panelists began by discussing a recent Legal and General Group study showing that student debt has more adversely affected Millennials than any other age group, with many workers aged 25 to 40 feeling affected. financially by the enormous costs of college. training at a crucial time in their lives — and in an economy that is struggling to improve.
But Millennials aren’t the only ones feeling the pinch, the panelists agreed. According to the study, as of November, Americans across all generations had a combined $1.75 trillion in student loan debt. The exorbitant cost of college tuition, combined with catastrophic economic events such as the 2008 financial crisis and the COVID-19 pandemic, have left many Millennials, Generation Xers and Baby Boomers in dire financial straits.
Since 2004, student loan debt is estimated to have increased, even accounting for inflation, said panelist Matthew Rutledge, an associate professor of economics at Boston College and a research fellow for the Center for Retirement Research at Boston College. Simply put, he says, a lot more debt is making its way into household portfolios, and it’s affecting how people make all kinds of financial and life decisions.
Saving For Retirement Versus Paying Off Student Loans: Which Should Be Your Priority?
The panelists noted that college enrollment figures have stagnated and even declined in some areas, at least in part due to the rising costs associated with higher education. On the other hand, more people are going to for-profit universities, the panelists said, or they’re receiving an online-only education that may not give them the returns that would make it worth investing in themselves through college loans.
Noting that student loan debt carries over to older generations as well, Craig Copeland, senior research associate with the Employee Benefits Research Institute, said it’s important to consider the full scope of the issue. Particularly affected are those mid- and late-career professionals who are going back to college to try to improve themselves, as well as those preparing for or helping their children attend college. start in life.
Many parents want to help their children pay for school, and are willing to take out student loans themselves or even draw on home equity lines of credit, noted Heather Kessler, relationship manager with Coldstream Wealth Management. As a result, many workers enter retirement age while burdened with more debt, causing them to either plan to work longer or reduce their standard of living.
For the best family outcomes, Kessler says, it’s critical to start having conversations about wealth and debt early, such as when the child starts high school. That includes discussing whether the family has money set aside for college and how much, the expectations for the child during and after college, and whether the student will have “skin in the game” by having to take on the debt on their own – which helps teach them accountability.
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Going to college is a self-investment, the panel emphasized and, like any investment, it doesn’t always pay off as expected. For example, students obtaining graduate degrees and older workers who go back to school well into their careers may be at greater risk of increasing their student loan burden without
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