The White House has announced a new campaign seeking to spread the word about options for borrowing and help for borrowers to become more able to manage their student-loan debt.
Over 40 companies including Fidelity Investments and Rite Aid Corp., as well as universities and non-profits, have signed on to the Student Debt Challenge, which hopes to enroll borrowers into a suite of programs that place a cap on a person’s monthly payments based on income.
The Obama administration has worked since 2009 to enroll student-loan borrowers in plans such as these. Data from the Consumer Financial Protection Bureau found one in four borrowers are either behind in their payments or are in default. The hope is that the campaign will push companies, nonprofits, and other organizations to work together in an effort to not only better inform borrowers, but to also increase enrollment in such programs.
Efforts have been made to offer debt forgiveness or relief programs by various states and schools as concerns about how the collective $1.3 trillion in student loan debt could affect the economy. Students can leave school with upwards of tens of thousands of dollars in debt, which in turn can prevent them from purchasing a home, starting a family, or even starting their own business.
According to a 2015 survey from the Federal Reserve Bank of Philadelphia, high amounts of student loan debt stopped the efforts of one in four employees to start their own business. Meanwhile, a 2014 survey by Gallup and Purdue University found 25% of recent graduates who held loan amounts over $25,001 were delayed in their efforts to start a company, writes Joyce M. Rosenberg for The Detroit News.
Jennifer Hanson, the head of associate experience and benefits at Fidelity, notes the company has been concerned over the increase in student loan debt and the effect it has been having on employees and customers for a number of years now. For example, research has found that those who borrow money for college also have a hard time saving for retirement, which is a main component of Fidelity’s business.
In an earlier announcement, the company said it would offer $2,000 per year, for a maximum of $10,000, to be put toward the student loans of anyone who has worked for the company for more than six months. In total, over 5,700 employees have made use of the offer. Estimates from the company suggest around $5 million in principal and interest have been saved so far, writes Jillian Berman for The Wall Street Journal.
Fidelity is also working toward helping borrowers that do not work for the company. Hanson said Fidelity Labs, which creates new programs and services within the company, is turning its efforts toward helping borrowers to work through repayment plans and federal programs.
“It’s really hard for folks to navigate all the different repayment options,” Ms. Hanson says. “For us,” she adds, “it’s really about thinking about framing student loans in the context of other financial priorities like retirement.”
Meanwhile, Rite Aid said their efforts would focus more on offering information pertaining to the government’s income-based option, known as Pay As You Earn, in the pay stubs of their over 89,000 employees twice a year.
A number of universities are putting in effort as well. The State University of New York, with its 1.4 million students and employees, holds events on its campuses while also pushing its online financial literacy tool, including a section on income-based repayment plans.