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Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support

By Charles Knuth · November 28, 2023 · 6 minute read

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Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support

As we head into another month of federal student loan repayments, it is crucial for HR executives to recognize the urgent need to support their employees in making smarter student debt decisions. In President Biden’s June 2023 Fact Sheet regarding student debt forgiveness, he highlights the importance of understanding the federal student loan program’s new grace period and its implications. Here, we’ll explore the significance of the traditional grace period, the new 2023-24 grace period, the challenges employees may face, and why HR executives should take proactive steps to assist their workforce in navigating this critical financial phase.

The Traditional Student Loan Grace Period

Before we dive into the new program, here’s a look at how the “traditional” grace period works. Typically, the Department of Education (ED) gives students a set period of time after they graduate before they are expected to make any payments on their federal student loans. This gives borrowers a cushion of time to transition from their education to the repayment phase. For most federal student loans, including Direct Subsidized and Unsubsidized Loans, there is a six-month grace period after graduation, leaving school, or dropping below half-time enrollment. This period provides individuals with an opportunity to get financially settled and select an appropriate repayment plan.

The 2023-2024 “On-Ramp” Student Loan Grace Period

New this year, with the resumption of federal student loan repayment, the ED has created a temporary on-ramp period through September 30, 2024, during which borrowers who don’t make payments won’t default. This new extended “grace period” is designed to help borrowers who, after a more than three-year payment pause, may struggle to start repayments on time. According to the ED, this on-ramp period can help ensure that “the worst consequences of non-payment won’t happen right away.”

But there is a key caveat to keep in mind: While this grace period does delay the consequences of missed, late, or partial payments until September 30, 2024, the ED acknowledges they have no control over how credit scoring companies factor missed or late payments into their evaluation of a borrower’s credit. So, while they won’t report the account as delinquent, the credit bureaus could still factor this information into their scoring.

Also bear in mind that, as with other grace periods, interest will still build during the on-ramp, increasing the amount borrowers will owe overall.

Challenges Your Employees May Face

The resumption of student loan payments can pose significant challenges for employees. Many individuals may need to be made aware of the various repayment plan options available or may need help understanding the complexities of loan forgiveness programs. Additionally, the financial burden of student loan payments can impact employees’ overall financial well-being, causing stress and affecting their productivity and job satisfaction.

While the 2023-2024 “On-Ramp” Student Loan Grace Period is positioned as another tool that borrowers can leverage, it might not be the best option. Communication around this program has been limited and it may be confusing borrowers. It’s important for all stakeholders to understand — and not underplay — the potentially negative consequences of participating in this program, whether now or in the future.

Borrowers who take advantage of the on-ramp period will likely experience the consequences of missed or delayed payments at some point in the future. As a result, it’s in their best interest to understand the implications and, where possible, opt for another repayment option that may better fit their current situation. This is not a period to ignore your student debt, but rather a one-year period to make deliberate, gradual changes to get ready for repayment, and only if absolutely necessary. Employers can support this decision-making process by sharing timely, trusted, and relevant information.

The Urgent Need for HR Support

HR executives play a vital role in supporting their employees’ financial well-being. By providing guidance and resources, they can help employees make informed decisions about their student debt. Here’s a closer look at why HR executives should prioritize supporting their workforce in making smarter student debt decisions.

1. Employee Retention and Employee Benefits

Assisting employees in managing their student debt can contribute to higher employee retention rates and increased engagement. By alleviating financial stress, employees can focus more on their work and feel valued by their organization. This benefit demonstrates an organization’s commitment to supporting employees’ financial goals and can significantly impact employee satisfaction and loyalty.

2. Attracting Top Talent

In today’s competitive job market, offering support for student debt can be a significant differentiator for attracting top talent. Potential candidates increasingly consider an employer’s commitment to employee financial well-being when making career decisions.

3. Enhancing Financial Literacy

By providing educational resources and workshops on student loan management, HR executives can improve employees’ financial literacy. This empowers individuals to make informed decisions about their student debt, leading to better financial outcomes in the long run.

4. Promoting a Culture of Support

By actively addressing the student debt crisis and offering support, HR executives can foster a culture of support and empathy within the organization. This can create a positive work environment where employees feel valued and supported in their financial journey.

Budget-Neutral Ways to Get Started

Leverage the SoFi at Work Student Debt Navigator Workbook

To further assist employees in managing their student loan obligations effectively, HR executives can promote the SoFi at Work Student Debt Navigator Workbook. This comprehensive tool is designed to help individuals navigate and manage their student loan obligations with ease. The workbook provides guidance for understanding federal student loan repayment options, exploring loan forgiveness programs, and creating a personalized repayment strategy.

By partnering with SoFi at Work and providing access to the Student Debt Navigator Workbook, HR executives can empower their employees to take control of their student debt and make informed decisions. This tool not only enhances financial literacy but also promotes a sense of support and guidance within the organization.

Distribute SoFi at Work’s Guide to the Restart of Federal Student Loan Repayments

The SoFi at Work Guide to the Restart of Federal Student Loan Repayments was explicitly created for this period when the federal loan pause has ended and borrowers are gaining their financial bearings. This timely resource includes helpful information on how to make a stress-free play for repayment. It also offers valuable resources and tips for budgeting, saving, and improving overall financial well-being.

The Takeaway

As this new student loan grace period (or on-ramp) begins, HR executives have a unique opportunity to support their employees in making smarter student debt decisions. By prioritizing financial well-being and offering resources, guidance, and tools like the SoFi at Work Student Debt Navigator Workbook, HR executives can make a significant impact on their employees’ lives. Taking urgent action to address the student debt crisis will not only benefit individual employees but also contribute to a more engaged, loyal, and productive workforce. Let us stand together and support our employees in their journey towards financial freedom.


Photo credit: iStock/filadendron

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