Many recent graduates are waiting to hear whether the Supreme Court will approve the Biden administration’s student loan forgiveness plan. And while we can’t predict what debt relief decision the Supreme Court will make, we can offer some expert advice to help you navigate the uncertainty.
Patricia Roberts is a financial educator who has spent over two decades helping people understand how to save money on student loans.
“Over the past 24 years, I’ve helped thousands of families avoid millions of dollars in student loan debt by educating them on ways to avoid or minimize debt,” says Roberts. “I am the author of Route 529: A parent’s guide to saving for college and career training and is the Chief Operating Officer at Gift of College, Inc. where I support employers in offering both tax-free student loan repayment assistance and 529 college savings plan benefits to help employees avoid student loan debt in the first place.”
We asked Roberts five questions about the current student loan environment, including how current students can avoid excessive student loan debt, what recent graduates can do to secure employer support, and how to manage your student loans while you wait for the Supreme Court̵7;s decision.
Those questions are below, along with her answers.
How Can Current Students Avoid Student Loan Debt?
Current students should make every effort to complete their degrees on time to avoid increasing the total cost of their post-secondary education and to avoid accumulating additional student loan debt.
How Can Recent Graduates Manage Their Student Loan Debt?
Students who will graduate with student loan debt should look for post-graduation employment opportunities with employers willing to provide assistance with student loan repayment.
While some employers already offered student loan assistance, a growing number are now doing so thanks to some developments in 2020. Under the CARES Act (2020) and as extended by the Consolidated Appropriations Act (2021), employers may, through January 1, 2026, offer up to $5,250 in tax-free student loan repayments for each employee.
The good thing about this is that the payments are not counted as taxable income to the employee, are not subject to employer’s tax and can be taken as a business tax deduction by the employer as well. It’s a win for the employer and a win for the employee!
Should recent graduates choose employers based on student loan benefits?
Current students should inquire about student loan benefits when looking for opportunities to start their careers, and recent graduates who are already employed should see if their current employer might consider offering help if they don’t already.
Your employer may not be aware of the tax benefits they can get by subsidizing student loans – so talk to your human resources department and see if they can get the ball rolling. If the student loan forgiveness plan goes through and you don’t need your employer’s help, you’ve still helped other employees who may need it now or in the future.
What Should Graduates Do While Waiting for Student Loan Forgiveness?
If you are eligible for student loan forgiveness but are facing uncertainty while you wait for the upcoming decision from the Supreme Court, here is my advice:
Put away as much money as you can for your outstanding student loans while you wait for the results. If you’re taking advantage of the interest-free break on student loan payments, consider saving the value of what your payments would have been (if you haven’t already). You can also cut back on everyday expenses, or set aside a portion of any upcoming tax refund or compensation bonus you may receive.
After the final decision is made and you determine exactly how much you still owe on your student loans, you can make a one-time payment to your principal while the zero interest payment break is still in effect.
If the Supreme Court ruling goes well and you don’t need the money you saved to repay outstanding student loan debt, the funds will be incredibly valuable for rainy days or as a nest egg for future financial goals.
What else can recent graduates do to manage their student loans?
Whether you are a recent graduate or a current student, I would invite friends and family to contribute to your outstanding student loan balance for holidays, birthdays, and other special occasions. Let’s face it – most gift givers have no idea what to buy you and end up spending money on gifts you don’t need.
Through a crowdfunding site like GiftofCollege.com, you can create a profile, link your student loans and invite others to contribute with amounts starting at $25. It can take a village to pay for higher education, and loved ones may welcome the opportunity to ease your burden by helping pay off your outstanding debt.