HR Professionals Await Biden's Plans for Student Debt

​On his first day in office, President Joe Biden issued an executive order pausing federal student loan payments. HR students and emerging HR professionals are closely monitoring the situation as the president and Congress consider further, permanent action to alleviate student debt. 

Executive Action

On Jan. 20, the president directed the acting secretary of education to extend the pause on federal student loan payments through Sept. 30, and to keep interest rates at 0 percent. The pause, which has already been renewed twice since it was enacted in March 2020, had initially been set to expire on Jan. 31.  

While this may feel like a Band-Aid solution to many professionals struggling with student debt, some have found it to work in their favor. "I love it," said Amanda Brunson, MHR, SHRM-CP, global HR business partner for Sabre, and a member of SHRM's Young Professional Advisory Council (YPAC). "I have a lot of student loan debt. Since March, I've been able to make payments towards the principal. And it seems like for all the years that I've been paying on my student loans, everything was going towards the interest. Only a very small fraction of what I was paying was going to that principal."

About 41 million Americans will continue to benefit from the federal government's pause of student loan payments. The directive excludes more than 7 million borrowers whose federal loans are held by private companies or universities.

Long-Term Solutions

Advocates are eyeing long-term relief for student debt. The grassroots organization Student Loan Justice noted that even before the pandemic, 1 in 5 adults had student loans, and more than 80 percent of them were either unable to pay those loans or were paying but balances were still going up. Additionally, supporters see canceling student debt as a way to ensure equity in the economy. 

"Just as with the Great Recession, communities of color are disproportionately affected by the current crisis," said Ashley Harrington, federal advocacy director and senior counsel for the Center for Responsible Lending. "They also shoulder a disproportionate amount of the $1.6 trillion student debt burden that is draining our economy."

Advocates have some powerful allies in Congress. Senators Elizabeth Warren, D-Mass.; and Chuck Schumer, D-N.Y.; and Representatives Ayanna Pressley, D-Mass.; Ilhan Omar, D-Minn.; Alma Adams, D-N.C.; and Mondaire Jones, D-N.Y., held a press conference Feb. 4 calling for the president to cancel up to $50,000 in student debt via executive order. In addition to noting the severe impact the student debt crisis has had on Black and brown communities, Jones pointed out that it has also affected LGBTQ people. "Members of the LGBTQ community, largely because their families tend to disown them, disproportionately have higher student debt," he said.

However, in December, Biden said it was "questionable" whether he would have the power to forgive up to $50,000. "I'd be unlikely to do that," he said.

During his campaign, Biden advocated canceling up to $10,000 in federal student loan debt. White House Press Secretary Jen Psaki reiterated those comments on Feb. 4, and indicated that the president would prefer Congress to prepare a bill rather than take executive action.

Opponents of student debt cancellation argue that it would unfairly provide support to high-income earners while doing little to ease the burden for low-wage borrowers and nothing to help people who didn't pursue higher learning. According to an analysis of Warren's initial debt cancellation proposal in 2019 by Adam Looney, nonresident senior fellow of economic studies at Brookings, the bottom 60 percent of households would receive only 34 percent of the benefit. Meanwhile, Looney argued that the top 20 percent would receive 27 percent in annual savings.

Private Sector Support

In recent years, a growing number of companies have been offering student loan repayment services to their employees. And they're wise to do so; 86 percent of respondents to a 2017 survey by American Student Assistance said they would commit to a company for five years if the employer helped pay back their student loans.  

Google recently announced that it would match up to $2,500 per employee per year in student loan payments. The program is only available for U.S. employees right now, but Google plans to expand it internationally over time.

"These programs are absolutely impacting how companies are attracting and growing talent, and I think more organizations can introduce these programs and be innovative in their approach," said Brad Dalton, people partner at Google and also a member of the SHRM YPAC. "Students entering the workforce are really struggling with repaying loans, and this could be a new path for companies and organizations to make a significant impact with these concerns."

Chatrane Birbal, vice president of public policy, government affairs for SHRM, noted that employer-provided student loan repayment programs have been trending upward. These programs doubled from 2018 to 2019, going from 4 percent to 8 percent of companies. While 2020 didn't see any increase due to the COVID-19 pandemic and the resulting recession, Birbal expects more companies to take on these programs once the economy bounces back.

However, historically one major hurdle has been Section 127 of the Internal Revenue Code (IRC), which caps employer-provided education assistance at $5,250 per employee annually and did not include loan repayment. In 2020, two separate bills were introduced to expand Section 127 to include loan repayment and raise the yearly allowed limit.

The Coronavirus Aid, Response, and Economic Security (CARES) Act included a provision that allowed employers to temporarily provide student loan repayment benefits to employees on a tax-free basis up to $5,250. The provision was set to expire on December 31, 2020 but was extended in the Consolidated Appropriations Act, signed into law by President Donald Trump on Dec. 27 through December 31, 2025.

According to research SHRM published in August 2020, Americans overwhelmingly agree that employer-provided student loan repayment should be permanently extended. Moreover, education expenses and student debt have grown exponentially since 1978, when the $5,250 exclusion was established.

SHRM has long advocated expanding Section 127 to include loan repayment, as well as increasing the amount. "Providing education assistance is vital to strengthening higher education, allowing employers to attract the best employees, and positioning the U.S. to compete globally by building an educated workforce," the SHRM Public Policy Department said in a statement.