Employer Participation in Student Loan Assistance Act H.R. 795

January 2, 2019

Nothing could be better than working for a top company that helps you pay off your student loans, right? Well, a bill was introduced by legislators on 2/1/2017 that is trying to make this a reality. This bill was introduced as the Employer Participation in Student Loan Assistance Act. In addition to the introduction of this Act, the Internal Revenue Service (IRS) also released a private letter ruling. What could these events mean for companies and employees who carry student loan debt?

Employer Participation in Student Loan Assistance Act

First, this bill would amend the tax code by giving tax breaks to employers that provide educational assistance to employees. Educational assistance can be in the form of contributions to student loans through either a payment to the employee or lender.

Specifically, this act would allow employers to offer a tax-free student loan benefit in addition to a salary to its employees.

IRS Private Letter Ruling

Recently, there was a private letter ruling released by the Internal Revenue Service (IRS). If you want to review the contents of the private letter ruling, it can be found here. The ruling allows employers to use 401(k) plans to help employees pay down their student loan debt. It is done by taking the employer 401(k) match to pay down student loans.

Any employee who is eligible for a 401(k) plan would be eligible for this plan. The ruling states that the plan is a voluntary program that employees must elect to enroll. Employees who choose to participate in this plan would be eligible for non-elective contributions made by the employer to their student loan debt. These contributions would be equal to what would have been contributed to a 401(k) plan had the employee opted out of the program.

What Does Student Loan Debt Assistance Mean for Employers?

When managing a business, it is imperative that you stay on top of recent news. Part of staying on top of things includes understanding what challenges your employees face. Both these aspects of operating a business and understanding the needs of your employees, however, can fall hand in hand. When it comes to student loan debt assistance, it can be a huge positive for any business. Not only does student loan debt assistance help employees achieve their financial goals, but it also brings many benefits to a firm.

Offering a student loan debt assistance program does not typically cost a company extra. The employer contributions to student loans are what a company would have typically made as a 401(k) contribution. Therefore the costs of providing 401(k) contributions and student loan debt assistance are equal. Another positive that comes from offering a program like this is that it helps with finding top talent, recruiting, and retaining all-stars. With older generations of employees retiring in record numbers and the workforce shifting to younger millennials, it’s important to take some time to examine the benefits of providing student loan debt assistance.

As many millennials have student loans and report that paying them down is a priority over saving for retirement, companies should begin thinking about reevaluating their benefits package to attract millennials. Finding ways to help this generation pay off student loans could be a big boost to a company’s recruiting strategy. Offering student loan payment assistance could put a company on the cutting edge as far as millennial professionals are concerned.

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According to a benefits report by OneDigital, nearly 80 percent of employees surveyed by American Student Assistance felt that an employer-sponsored student loan repayment benefit would be a deciding factor in accepting a job. This could be a huge differentiator for an employer aiming to recruit the best employees.

The American Student Assistance survey also showed that 86 percent of employees would feel compelled to stay with an employer for at least five years in exchange for student loan repayment assistance. Considering how much companies spend on turnover (recruiting, training, and onboarding new employees), this could mean huge potential savings on talent management costs for employers.

What Does Student Loan Debt Assistance Mean for Employees?

Some companies already offer student loan assistance, but these funds are usually taxed. This type of assistance isn’t as attractive as pre-tax funds because taxes reduce the impact of payments on student loans. Tax-free repayment funds from an employer could be more effective in helping graduates pay down their student loans faster. Employees would avoid incurring taxes associated with this type of assistance.

Many Millennials also face the question of, “Should I save for retirement or pay down debt first?” Student loan debt assistance could be a solution that addresses both concerns. Young employees would have the ability to make substantial payments towards their student loan debt. With these large payments, they will be able to cut down their repayment time. That means young employees would have the ability to start saving for retirement earlier in their career instead of trying to pay down their debt.

Looking to the Future of Employment and Student Loan Debt

With the recent Employer Participation in Student Loan Assistance Act and IRS Private Letter Ruling, it seems student loan debt has become a problem for employees. Since employees are having difficulties with paying down student loan debt, it is time for employers to take action. Not only will employers benefit from offering student loan debt assistance programs, but it will most likely be at little or no cost to them.

If this act becomes a law, experts think that companies will immediately begin to rethink their benefits package and consider student loan debt assistance as a way to attract the best employees. Though it may not be easy for millennials to land a position with one of these companies, they will certainly have another factor to decide in student loan debt assistance when choosing their employer.

Interested in starting a conversation regarding your student loans? Give us a call: 1-844-601-ELFI.

5 Benefits Millennials Look For in Employers

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House Democrats Overturn DeVos on Student Loan Forgiveness

This Thursday, the Democrat-controlled House voted to overturn regulations introduced by Education Secretary Betsy Devos that eliminate the "borrower defense" rules introduced by the Obama administration. Critics have said the new regulations make it more difficult to get student loan forgiveness if a college suddenly closes. Sources say that the move to overturn Devos' new regulations won't pass the GOP-controlled Senate, however – and Trump is likely to veto the bill even if it does.

Source: USA Today

Could Elizabeth Warren Really Wipe Out $1 Trillion in Student Loans in a Single Stroke?

Democratic Presidential Candidate Elizabeth Warren recently vowed to eliminate hundreds of billions of dollars in student loans on her first day in office if elected president. Her plan was released just before Tuesday night's Democratic primary debate. While the ability to erase debt is typically a decision left to Congress, student loans may be a different story due to a loophole involving the "Higher Education Act" passed in 1965.

Source: CBS News

Study: Barely Anyone is Paying Off Their Student Loans

A recent study revealed that very few people are making progress on paying off their student loans, along with shifting factors in the nation's rising student loan debt. The study found that 51 percent of students who took out loans from 2010-12 haven’t made any progress in paying them off. Additionally, it showed that while in the past higher enrollment and rising tuition costs were the main drivers in the rising debt, slow repayments and amassing interest have now become the primary drivers.

Source: NY Daily News

IRS Issues Tax Guidance On Discharged Student Loans

The Internal Revenue Service recently issued guidance for some taxpayers who took out federal or private student loans and qualified to have their loans discharged. Typically, having loans discharged is treated as a taxable event, in which the forgiven amount is treated as income – but the tax break from the IRS allows the discharged amount to not be recognized as taxable income.

Source: Forbes

That wraps things up for this week! Follow us on Facebook, Instagram, Twitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-01-16

7 Common Student Loan Refinancing Questions Answered

By Kat Tretina

Kat Tretina is a freelance writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.

If you have student loan debt, you know how painful interest charges can be. High interest rates can cause your loan balance to grow over time, forcing you to repay thousands more than you originally borrowed. Student loan refinancing ¹ is a strategy you can use to manage your debt and save money. In fact, ELFI customers have reported that they see an average savings of $20,936 after refinancing their student loans². However, there are questions about student loan refinancing out there that may be preventing you from submitting a loan application. Here are some of the most common questions — and answers — you should know about.

1. Does refinancing student loans cost money?

One of the biggest myths is that refinancing student loans is expensive. And that’s because student loan refinancing is often confused with other forms of refinancing, such as refinancing mortgages. While refinancing a mortgage does involve closing costs, student loan refinancing should not. Plus, most lenders don’t charge any application or origination fees. And with Education Loan Finance, there are no prepayment penalties, so you’re free to pay off your new loan as soon as you’d like.

2. How long does it take to qualify for student loan refinancing?

Some forms of loans can take months to process, but student loan refinancing is different. You can complete the application in minutes, and you can do everything online. Once you submit your application, the lender will review your information and make a decision. In most cases, you’ll find out whether or not you’re approved in as little as one business day. If approved, the lender will work to disburse your loan. It can take a few days to a few weeks for that process to be completed, so keep making payments on your current debt until you receive a notification that the loan was disbursed. If you refinance your student loan with ELFI, you’ll have a personal loan advisor who will be your guide throughout the entire process.

3. Is savings from refinancing student loan debt significant?

You may think that student loan refinancing isn’t worth the work because it won’t save enough money for you. But taking just a few minutes to submit a refinancing application can help you save thousands over your loan repayment term. For example, let’s say you had $30,000 in loans at 7.08% interest — the current rate for federal PLUS Loans. If you repaid your loans over the course of 10 years, your monthly payment would be $350. In total, you’d pay $41,948 by the end of your repayment term; interest charges would add nearly $12,000 to your loan balance. Use ELFI’s student loan refinance calculator¹ to find out how much money you can save by refinancing your debt.

4. Will refinancing student loans affect my credit?

Some people hold off on student loan refinancing because they’re afraid it will damage their credit. However, lenders like ELFI allow you to get a rate quote (prequalify) with just a soft credit inquiry, which doesn’t affect your credit score. If you find a quote that works for you and submit a refinancing application, the lender will then complete a hard credit inquiry, which can impact your credit. However, the effect is usually minimal. According to myFICO — the organization behind the FICO credit score — one hard credit inquiry will typically take less than five points off your FICO credit score.

5. Is refinancing federal student loans a good idea?

If you have federal student loans, you may have heard that refinancing your debt isn’t a good idea. However, that’s not the case for everyone. When you refinance your loans, you will lose out on federal benefits like income-driven repayment plans and loan forgiveness. But those perks are only valuable if you’d actually use them. If you make too much money or don’t work in a qualifying field, you wouldn’t be able to take advantage of those programs. If you can afford your monthly payments and feel secure in your job, refinancing your federal student loans can help you save money and become debt-free sooner.

6. Do only federal student loans have forbearance or deferment programs?

A big perk of the federal loans is the ability to enter into forbearance or deferment. With these options, you can postpone making payments on your debt without entering into default. Few refinancing lenders offer forbearance benefits. However, there are some exceptions. With ELFI, you may be able to postpone your payments for up to 12 months if you’re facing a financial hardship, such as a job loss or medical emergency. That period can give you time to get back on your feet before you have to worry about making payments.

7. Can I refinance student loans more than once?

If you already refinanced your loans once, you may think you’re out of luck, and you’re stuck with your current interest rate. However, there’s no limit to how many times you can refinance your loans. If your credit score improves or you get a raise at work, you can refinance your loans again to see if you qualify for a lower interest rate. As you progress in your career and your finances stabilize, refinancing multiple times can help you pay off your debt even faster.

Refinancing your student loans

While student loan refinancing can be an effective way to manage your debt, there are a lot of myths and misinformation out there. Now that these common questions have been answered, you can move forward with the refinancing process with confidence. Use ELFI’s Find My Rate tool to get a rate quote without affecting your credit score¹. ¹ Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change. ² Average savings calculations are based on information provided by SouthEast Bank/Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon several factors. Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-01-15

Starting a Family? Why Now’s the Time to Refinance Student Loans

By Caroline Farhat

Are you planning to start (or add to your) family? Congratulations! Children are such a special joy, and starting a family is an incredible journey. Whether you’re already expecting or are just in the planning stages, there is a good chance you’ve started crunching some numbers to see how adding a family member will affect your monthly budget. It’s no secret that kids are expensive — the U.S. Department of Agriculture reported that, on average, it would cost a middle-income family $233,610 to raise a child born in 2015 through the age of 17. If you’re currently paying off debt, the eye-popping numbers a child costs may look even more daunting. But money should absolutely not stop you from starting a family. Of course, you want to be financially responsible, but you shouldn’t feel pressured to be debt-free before starting a family. Instead, focus on the things you can do to lighten your budget and leave more room for your new bundle of joy. Here’s how refinancing student loans can help.

Why Refinancing Student Loans When Starting a Family is a Smart Move

One of the biggest worries many new parents have about starting a family is the financial unpredictability children can bring to the household budget. Medical costs, childcare, and all of the latest baby products can certainly add up. One of the best ways to combat this unpredictability is by lowering your fixed monthly costs. If you are currently paying off student loan debt, refinancing student loans is one of the smartest steps you can take to lower your monthly payment. In fact, student loan borrowers who refinance with ELFI* have reported an average savings of $309 per month1. To put that in perspective, that would get you 38 packs of 32-count diapers. Plus, the emotional benefits you can receive by throwing less money at your student loan debt and more on what is really meaningful to you can be priceless.

How To Refinance Student Loans

If you’re looking at your interest rate and are ready to refinance, you’ll be happy to know that it’s a simple process that can be done entirely online. If you refinance student loans with ELFI, the application process is 100% free, and refinancing has no origination fees or prepayment penalties. The ROI of refinancing student loans can also be quite large. Just an hour or two of work can yield you thousands of dollars in savings. Not bad, right? Here’s what to do:

Check the requirements - While student loan refinancing is a smart move for many student loan borrowers, there are a few cases where refinancing may not be the best option. For example, if you qualify for student loan forgiveness through a federal program, refinancing student loans would make you ineligible for this benefit. Review the basic criteria for student loan refinancing to make sure it’s the best fit for your particular situation. It’s important to fully understand how the Public Student Loan Forgiveness (PSLF) program works and the eligibility requirements.

Crunch the Numbers - Put your data into our student loan refinance calculator to see your potential savings. Our calculator has options for fixed and variable interests and loan terms of 5, 7, 10, 15, or even 20-year terms so you can see how your choices affect your monthly and lifetime payment*.
Get prequalified - You can get prequalified and receive personalized rates in just a few minutes without it affecting your credit score.
Gather your documents and apply - As mentioned, the application is 100% online, easy, and free. When refinancing with ELFI, you are paired with a personal loan advisor who will guide you through every step of the process. The Personal Loan Advisor who speak with at the beginning of the student loan refinancing process is the same person you’ll speak with at the end, which is nice because you won’t find yourself repeating information or prior discussions.

What to Do About Other Debt and Expenses

If you’re like many Americans, student loan debt may not be the only debt you are currently paying off. A whopping 80% of Americans are currently in debt, according to a report from The Pew Charitable Trusts. Here are a few ways you can pay off your debt more quickly or more efficiently.

Refinance Your Debt - Similar to refinancing student loans, you should look for opportunities to refinance any of your other debt. For example, if you have a mortgage, refinancing could save you thousands of dollars over the life of your loan. Auto loans can also be good candidates for refinancing.
Call Your Credit Card Companies - A reduction in the interest rates on your credit cards can make a big difference in how quickly you can pay down debt. A simple, polite phone call to your credit card companies requesting an interest rate reduction can sometimes be all that it takes. You have nothing to lose (except a few minutes), and the payoff can make a major difference in your monthly budget.
Explore Medical Debt Options - Approximately 66.5% of Americans who file for bankruptcy due so because of medical bills. There are options to get this debt under control, but it will take some leg work. NerdWallet has a number of good tips for how to negotiate down your medical debt or develop a payment plan that works for your budget.

Typically, when paying off debt, it’s wise to start with the loan with the highest interest, as that will save you the most money in the long run. Once you have reduced your interest rates as much as possible, take stock of all of your existing debt payments and their monthly costs, and develop a plan. With any of the money you saved, you can start a separate savings account for your growing family.

Children Are Priceless, So Don’t Let Debt Stop You

It may sound cliché, but there are things in life that are just priceless. For many people, the love and joy a child can bring to life are worth more than any spreadsheet will tell you. If you are currently working towards paying off debt, don’t let the goal of being debt-free trump your desire to start a family. There simply may never be a perfect time. Plus, with a little planning, it’s entirely possible to start a family and still work on your financial goals. Good luck to all of our current and future parents out there – you got this!

*Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions, The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change. ¹Average savings calculations are based on information provided by SouthEast Bank/Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon several factors. Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

Employer Participation in Student Loan Assistance Act H.R. 795