New legislation is helping workers and employers work together to tackle the $ 1.7 trillion student debt problem


BOSTON–() – With 44 million Americans owing an estimated $ 1.67 trillion in student debt, great emphasis has been placed on helping individuals repay their balances. The federal student loan payment hiatus was extended to September 2021, and last December’s stimulus package included the expansion of a provision for employers to help their employees repay student loan debts. There was great interest in the new provision, including within the healthcare industry, whose workers are not only feeling great stress from the pandemic, but according to Fidelity Investments® Research, most student loans are encumbered – on average nearly $ 10,000 more than the closest industry.

Originally introduced in April as part of the CARES Act, the provision was supposed to expire in late 2020 and has been extended by five years to December 31, 2025 Student Loans every year, meaning the money paid is considered tax-free for both employees and employers . The provision modernizes a long-standing tuition reimbursement tax exclusion by now offering the $ 5,250 combined tax-free limit that can be applied to student debt repayment, tuition reimbursement, or both.

The expansion is a great opportunity for employers to get involved and some of the early adopters to use Fidelity’s student debt program are seeing an impact. This includes Fidelity’s own benefits team, which adopted the new tax treatment in April 2020 and estimates the provision will save each Fidelity participant an average of about $ 500 in tax breaks, which adds up to more than $ 2 million estimated annual savings of around 4,500 employees. Some program participants also receive tuition reimbursement benefits.

“Our employees have told us they are putting off important life choices like buying a home, saving up for retirement, and even starting a family because of their student loan debt,” said Tom Vogel, Head of Financial Benefits, Fidelity Investments. “Since our student loan assistance program began in 2016, more than 12,000 Fidelity employees have saved $ 58 million in capital and approximately $ 27 million in interest payments, saving an average of $ 7,000 per person. We heard that some employees were able to move their scheduling forward because of the benefit, and that’s exactly what we wanted to achieve. We are pleased that our employees will also benefit from the extended tax relief. ”

“The ability to work on various other life savings goals in addition to paying off student debts is a major reason many Plan Sponsors are adopting this program,” added Asha Srikantiah, director of Fidelity Investments Student Debt Program for Workplace Investment. “Student debt repayment benefits from an employer make it easier for employees to breathe knowing they have help dealing with stressful debt, and with this scheme they won’t be taxed for doing so. For employers, the tax savings provide another compelling reason to offer a student debt allowance in addition to a potentially improved deductible, as we have seen the turnover rate of employees who took advantage of the program was 52% lower than those who were entitled to but not registered1. ”

2020 data reveals the extent of the student debt problem, particularly for healthcare workers

Leading service provider Fidelity has already seen an increase in the number of plan sponsors interested in: a Debt aid for students, especially employers in the healthcare sector. This may not come as a surprise given the year-end data from Fidelity shows that healthcare workers have a heavy burden of student debt – $ 690 a month, $ 100 a month more than the closest industry. This data comes from nearly 200,000 loans made with Fidelitys. were reported Student debt tool2.

“Health care workers are at the forefront and caring for us every day during this pandemic, but they are also struggling the most with student debt,” Srikantiah said. “Our studies suggest that women and people of color are also disproportionately affected. Given the increased stress we all face, it is important to realize how closely financial stress is related to emotional well-being. Paying off debt can have positive effects both financially and on health, work and life as a whole. ”

Loyalty data also shows that student debt affects all generations and professions. Perhaps surprisingly, baby boomers with college debts are actually ahead of other generations, in part because of Parents Plus loans secured for their children. It is noteworthy that the extended tax exemption does not help people with Parent Plus Loans, as the debts have to be incurred for their own education.

Unfortunately, Fidelity research also shows that many people delay their contribution to retirement or borrow against their 401 (k), an action that literally borrows against their future to pay for the past. These loans can have a negative impact on 401 (k) balances – especially among younger retirees who have a longer time horizon and greater potential to save more.

Fidelity offers several student debt solutions

Fidelity recognizes that the student debt problem is not a “one-time” solution and offers a holistic range of student debt solutions including:

  • ONE Student loan program This enables companies to develop a program that best suits the needs of their specific workforce that can aid in recruiting, improving retention and increasing productivity, including three options: Student Debt: Direct℠ that helps employees pay their loans monthly – now tax-free and integrated with tuition reimbursement based on customer needs; Student Debt: Choice of Benefits℠ that give employees flexibility by allowing them to apply the value of other benefits (such as PTO) to student loans; and Student Debt: Retirement℠, which enables employers to make 401 (k) contributions based on student loan payments.

  • loyalty Student debt toolwhich is completely free and allows borrowers to get a single overview of their government and private loan options by consolidating all of their student loans in one place along with the repayment options available.

  • Access to a refinancing platform for student debt, Credible.com3, via its Student Debt Tool, which gives users the ability to compare pre-qualified interest rates from up to ten refinancing providers without compromising their creditworthiness.

  • To help people avoid debt in the first place, Resources for planning before college to help families plan, save, and pay for college.

About Fidelity Investments

Fidelity’s mission is to create a better future and deliver better results for the customers and companies we serve. With $ 9.8 trillion in assets under management, including $ 3.8 trillion in discretionary assets as of the 31st employee benefit programs, and providing investment and technology solutions to more than 13,500 institutions to help keep their own clients’ money to put on. Fidelity has been privately owned for more than 70 years and employs more than 47,000 people focused on the long-term success of our customers. For more information, visit

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© 2021 FMR LLC. All rights reserved.

1 Loyalty analysis of 24 early adopters of Student Debt: Direct Benefit, representing more than 100,000 participants. The total sales results were calculated from January 2019 to January 2020.

2 The data comes from nearly 54,000 Fidelity Tool users who shared student loan information from nearly 6,000 companies as of December 31, 2020.

3 Credible Operations, Inc. is not affiliated with Fidelity Brokerage Services, the NYSE member, SIPC, or any of its affiliates. Credible is solely responsible for the information and services provided. Fidelity disclaims any liability arising from the use of this information.

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