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Welcome to This Week in Benefits, a new biweekly podcast from Mployer Advisor, the company that is changing the way employers search, evaluate, and select insurance advisors online. In each episode, our team will bring you the latest news and industry updates in the world of employee benefits. We will break down top headlines, bring you interviews with industry insiders, and highlight market trends and stories we’re following.
In case you missed Episode 11, click here for the show notes.
Date: September 21, 2022
Episode Season and Number: Season 1, Episode 12
Episode Title: Why Employers Should Be Following the National Conversation Around Student Loan Forgiveness
In this week's episode, Abbey Dean sits down with Weller Emmons, VP of Operations for Mployer Advisor, to discuss the Biden Administration's recent announcement on student loan forgiveness and what employers should consider when discussing the value of student loan repayment benefits.
To listen to Episode 12 of This Week in Benefits, click here.
The White House Fact Sheet on Student Loan Forgiveness
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Abbey Dean: Hi everyone and welcome to another episode of This Week in Benefits, the podcast from Mployer Advisor where we discuss all things employee benefits. I'm your host Abbey Dean, Mployer Advisor's Director of Content. Today. I am excited, of course, because I am joined by the Weller Emmons, VP of Operations here at Mployer Advisor, and I don't think he's been on an episode in a hot minute. So very excited to have him on in which I will sort of pick his brain a little bit about the Biden Administration's recent announcement on student debt relief and how that ties into employers, employee benefits, open enrollments, all of that. So stay tuned.
Hi everyone, and thanks for joining me today for this week's episode. I'm very lucky to once again be joined by friend and coworker and VP of Operations at Mployer Advisor, Weller Emmons.
Weller Emmons: Hey there Abbey. Thanks for having me.
Abbey Dean: You're welcome. Okay, it's been a minute since you've been on, but all the listeners wrote in and said they really missed hearing that smooth jazz like podcast voice. And so this one is <laugh> for all of those people who wrote in. Is that okay?
Weller Emmons: This one's for you crowd and yes, I've been at work taking lessons, so please be on the lookout for my own unique voiceover by Weller Emmons coming soon to a podcast near you, <laugh>.
Abbey Dean: Okay. We'll be the first ones to debut that maybe. Okay, so today we are taking on the topic of student debt relief. Specifically we wanted to tackle this in the wake of the Biden administration's announcement on student debt relief. So weer, can you provide our listeners with an overview of that announcement I believe came out three and a half weeks ago?
Weller Emmons: Yeah, so just as a little bit of background generally, in the past, students go to school, they take out loans, a lot of times they take out federal loans and then they have a set number of years to repay that loan. And when Covid hit and really in February and March of 2020 the Trump administration made a decision to pause student loans repayments. President Biden has continued that path by continually delaying the return to student loans. And one of President Biden's major goals was to announce a kind of broader plan to fix student loans. And this was the first step as part of that plan which is part is kind of multi-part, but one part is to continue to delay the repayment until the end of the year. And then secondly, announcing some level of forgiveness to students who maybe may qualify for this kind of forgiveness.
Abbey Dean: Excellent overview. Thank you. And this is according to the fact sheet that the White House distributed I believe, Weller, that the Biden Administration's Plan was that about up to $10,000 can be forgiven and so this, as long as their household income was less than $125,000 a year. Is that correct?
Weller Emmons: So it varies a little bit more than that and there's a bunch of nuances, but I think broadly speaking is $10,000 per person when the per person income is $125,000. So if you're in a household that makes less than $250,000 you and your spouse could both qualify for $10,000 debt forgiveness and some misses. If you have things that are called Pell Grants, you could get additional $10,000 per person. So there's a couple of nuances, but so it's 10,000 per 125. That's kind of the short and sweet of it.
Abbey Dean: So Weller why should employers care about the student loan news or really their employee student loans?
Weller Emmons: So I think that's a really interesting question. And as a byproduct of today's kind of educational system and I'm not going to go into all the in-depth politics here, but in short, if you are hiring people who need a college degree or even some level of college degree, including a junior college kind of associate degree, a lot of individuals are having to take out loans to help finance that education with the intent that the salary or income they will produce on the backside, the education will help pay off those loans. And so the reason emplyers should really care is that a lot of investment has been made by your employees or potential employees to do a job for which they might be hired into in the future. And the question an employer may ask is like, okay, that's great, but still, why do I care what individual investments employees have made?
And my response to that would be is that the amount of debt that a lot of employees are taking on is very substantial, and that it's impacting their ability to take on certain types of work, their choice of work their finances, post-work, and anyone who's urban been in financial distress knows that it can bleed over into your work life balance and everything else. So this is a major part of the psyche I'd say a lot of millennials and Gen Z type employees who have a existential amount of student loans. And there's even been evidence that even older generations still have student loans that they're contending with and it's delaying them from a financial perspective in their life. So there's like a lot kind of wrapped up into this that a normal employer wouldn't care, but because it's impacting their employees so fundamentally on their financial status, it does bleed over into work.
Abbey Dean: Actually, according to a fairly recent piece from SHRM they say the effect of student loan debt on US workers is impossible for employers to ignore. In fact, the Federal Reserve estimates estimates that 30% of all adults are roughly four in 10 people who went to college collectively owe more than 1.7 trillion in student loans, and which represents a sizable percentage of the workforce that employers are recruiting from amid this current tight job market. Does that figure Weller surprise you or is it about par with what you thought?
Weller Emmons: No, it seems about right on. And what we've seen is a rapid increase in the cost of education. My own alma mater, granted I went to a private school that's known for being expensive, but Vanderbilt's current cost of attendance for their first year is $84,000. That's directly from their website. So you can imagine that the cost are ballooning quickly and a lot of people are taking loans to help finance that level of education.
Abbey Dean: I have a really bad taste in my mouth after <laugh> hearing that number.
Weller Emmons: And just to clarify, that's $84,000 for what, one year? So in total, you're looking at a college bill that's north of $320,000.
Abbey Dean: So Weller, you've made the case for why employers should be caring about this issue. And in fact, a lot of employers already are. An October survey by the Employee Benefit Research Institute, in fact showed that 17% of employers currently offer student loan debt assistance and another 31% plan to do so. So, before we go farther, can you give everyone listening a brief definition of student loan or payment benefits?
Weller Emmons: Yeah, so employers have had the ability for some time to pay for student loans or to pay directly for tuition and even eliminate student loans. Especially in the MBA world, it is highly common for an employer sponsor to sponsor a student to go get their MBA and in exchange a student agrees to a multi-year commitment back to that company. And that's existed for a very long time now. And then what started happening recently is that there was a provision made in 2021 that enabled employers to pay directly towards student loans as part of the Consolidated Appropriations Act of 2021. And it's under section 127 of the IRS code, if you wanna get really technical, but it allows for an employer to make a contribution of up to $5,250 per employee annually through 2025. And this is a non-taxable income in a way. So think of it almost like a 401K match that you can apply at approximately $5,000 towards the loans that your employees have.
Abbey Dean: So while the Biden administration's decision to obviously extend the moratorium on repaying loan debt until December 31st was very good news and the announcement of forgiving up to $10,000 is good news for some people, especially the low and middle income borrowers, what impact could this decision have on employers who are currently offering student loan repayment benefits or are considering it?
Weller Emmons: So step one may be just to wait to make sure that what Joe Biden proposed is actually enacted in law. There is some belief that the mechanism in which he did this is not strictly legal and that it may get shot down in court or in Congress. So there's some possibility that none of this matters and it just kind of disappears. So that's maybe step one. I might just wait a little while to see if this actually is enacted.
Abbey Dean: I think the other interesting thing, and I didn't realize there was a sort of debate around this, but when I started researching the topic for this episode, there was a lot of debate in the HR community be about whether this was even an equitable benefit to offer your workforce. So while Weller and I were saying, depending on your population, if you don't have a lot of Gen Z, millennial or even kids coming out of college, you could be accidentally maligning your workforce and offering a benefit that isn't seen as equitable to every employee in your company.
Weller Emmons: Yeah, I think that's a valid concern. If you assume that student loans are primarily held by people who are younger and you have an older workforce, then does this benefit even doing anything for your older workforce, can they actually use it? Or alternatively, if you have a very split workforce where it's equal parts older and equal parts younger, then this benefit only really kind of benefits the younger people. And how will your older parts of your workforce react knowing that you as HR gave a benefit that doesn't impact them at all.
Abbey Dean: And because of this ruling, you decided to say, go forward with student debt relief program, especially with inflation and the high price of colleges that we've seen and Weller mentioned you could also accidentally create some ill will perhaps from some of your other employees who have already paid off their debt too. It gets a little sticky very quickly according to some of the research that I did.
Weller Emmons: So something to definitely look into. I think that's part of some of the political consternation around this is that it benefits individuals who are low income, have high debt, and may not have refinance, or may not have been frugal to pay down their debt or whatever other reason if you pay down your debt very aggressively because whatever reasons you're not going to benefit. So there's some, there's, I almost call it jealousy of this benefits other people and not me.
Abbey Dean: Well, when that announcement came out, I think I went over to your office and I looked at you and I was like, hey, you excited about that news? And you were like, maybe <laugh>. And I was really kind of salty about it because I was like, I wish this happened five years ago.
Weller Emmons: It's interesting. The income limits are interesting the types of financing are interesting and I think they'll see some divides even in my own household to put it lightly that some people in my household will benefit from this decision. Other people will not based on decisions made in as far as our education and training.
Abbey Dean: One final thing, I also believe that extending this benefit, much like offering 401k can be very expensive, right? Weller?
Weller Emmons: Yeah. So if you're talking about roughly $5,000 per employee that can be pretty expensive pretty quickly. I mean, with a health insurance plan that's $500 per month for an employee it's $6,000 per year. You're talking about something that's almost equivalent to a health insurance policy.
Abbey Dean: So I think the, there's not an answer to this right now, but that's a lot to weigh and consider as always among your certain, the benefits you decide to offer your workforce, making them specific to that population. But also maybe it seems like it's best to just wait and see what happens with this one.
Weller Emmons: Yeah, I would definitely keep an eye on what happens to see whether this legislation or executive decision is actually enacted but I would maybe start to prepare and to explore about ways that this can impact your company and your benefits and to even see if this is a benefit that is even wanted or needed by your particular workforce. I think different types of companies will find this benefit more impactful to their workforce and other types of companies. So something to definitely explore and to monitor in the coming months.
Abbey Dean: One final note, we actually have an update from a previous podcast episode that just came out this morning. Weller, would you like to share?
Weller Emmons: Yeah. So if you guys remember from some of our earlier podcasts, we were talking about the United Healthcare's potential acquisition of Change Healthcare and some of my opinions on whether that deal would go through or not. And one of the last updates we had was that the FTC was looking into this acquisition from an antitrust perspective. Well, earlier today a judge came out and basically allowed the acquisition to go through and is saying the FTC inquiry on antitrust is basically not vowed for right now which definitely increases the odds of the acquisition going through but there's still a lot of movement in this space. I'm sure things will continue to change and especially as this may get elevated elsewhere in the Justice Department but something to just note that at least there's been one more person saying yes, it should go through. <laugh>
Abbey Dean: A good update. Okay. Weller, thank you so, so much for being here. We will see you back soon.
Weller Emmons: Thanks for having me and always happy to be on this podcast.
Abbey Dean: And that is the end of today's show. Thanks to you guys for tuning in. Obviously, thank you to Weller for bringing all of his wit and wisdom to this week's episode. If you have not yet, please subscribe to the podcast and leave us a review. You can also leave us a voicemail message if you want to suggest ideas or have follow up questions to this or past episodes. Thanks for listening and I will see you next time.
Thank you for listening to this week's episode of This Week in Benefits, brought to you by Mployer Advisor. Mployer Advisor is changing the way employers search, evaluate, and select insurance brokers. Our intuitive platform connects employers and employees to get great benefits and insurance plans by providing employers with actionable data to easily evaluate and select the best advisor for your company's specific needs. To learn more about Mployer Advisor and our suite of products, please visit our website at mployeradvisor.com and tune in next time. Thanks.
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