Student Loan Debt Decision Could Spark the Need for More Employer Assistance

The Supreme Court met Feb. 28 to hear two cases challenging President Joe Biden's student loan forgiveness plan—cases that put promised relief for millions of Americans at risk.

In August, Biden announced that the federal government would repay up to $10,000 in student loans for borrowers who earned less than $125,000 during the pandemic and up to $20,000 for those who received Pell Grants. About 26 million borrowers have applied for debt forgiveness so far, although legal challenges to the plan resulted in the Department of Education halting relief applications in November 2022.

During the court hearings, conservative justices argued that the Biden administration is overstepping its authority in broadly canceling federal student loans because of the COVID-19 pandemic. Justices heard three hours of arguments, with early reports indicating that the Supreme Court appears ready to sink Biden's forgiveness plan.

While the fate of Biden's plan is unknown, one thing is certain, industry insiders contend: The case puts a spotlight on the massive toll of student loan debt afflicting Americans, highlighting a need for additional support from employers. It's also likely that the Supreme Court case—no matter the outcome—will heighten interest in student loan repayment benefits.

"The nationwide conversation that this news has sparked is reigniting the push for workplace programs that help employees navigate their student loans, which are a massive financial burden on countless individuals," said Edward Gottfried, director of product at Betterment at Work, a New York City-based financial wellness provider. "This can take a few different forms, from educational resources to repayment tools that make it easy for workers to understand their debt and how to prioritize paying it down over specific time horizons, to benefits such as matching contribution programs or direct financial assistance."

If the Supreme Court kills Biden's student loan forgiveness plan, employees will likely be clamoring more than ever for help in paying off their student debt. And even if Biden's plan does survive, the program doesn't apply to all employees and doesn't take into account the full scope of debt. The average borrower owes more than $37,000 in student loans, according to the Education Data Initiative.

"Regardless of the outcome of these hearings, there will ultimately still be significant amounts of student loan debt across the United States," Gottfried said.

A Popular but Uncommon Benefit

Student loan repayment benefits have been an emerging trend over the past several years, although there has not been widespread adoption from employers. Data from the Society for Human Resource Management (SHRM) found that about 7 percent of U.S. organizations offered student loan benefits in 2022, down from 9 percent in 2021.

Although relatively uncommon, student loan repayment programs are among employees' most widely desired benefits: A 2019 survey from the American Institute of Certified Public Accountants, for instance, found that Millennials with student loan debt value help with repayment over all other employee benefits.

Firms offering the benefit—such as Google, Aetna and Estée Lauder—argue that it helps to recruit and retain workers while relieving some financial stress for employees, which makes them more productive on the job.

Offering student debt relief "is an opportunity for employers, particularly those outside the tech sector, to compete for talent by offering that as a benefit, knowing so many Americans are struggling with student loans as their second most significant debt," said Brooke Skinner Ricketts, president and co-founder of Beyond Barriers, a New York City-based career fitness platform focused on helping women.

Interest will likely increase due to the Supreme Court hearing on Biden's forgiveness plan, coupled with the impending expiration of the federal moratorium on payments—which allowed borrowers to pause student loan payments due to the pandemic. After multiple renewals, that moratorium is set to expire in June.

"The combination of the continued moratorium on student loan repayments and the proposed loan forgiveness plan have created a false sense of security for employers, who have delayed supporting their employees who have student loan debt," Gottfried said. "On the other side of this decision and the end of the moratorium, employers will be expected to serve as a partner and educate employees on the outcome of these hearings—what their outcome will mean for their student debts—and provide advice on how to approach repayment."