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The amount of student loan debt in the United States is staggering and only continues to rise. As a result, one of the most desired employee benefits in 2018 is help with that student loan debt. And some employers who want to recruit and retain star talent, in 2018 and in the future, are coming up with creative strategies to do just that.

This trend—employers helping with student debt—is expected to increase, say some industry experts . In this post, we’ll share ways employers are helping employees to pay down student loan debt, with a focus on an August 2018 Internal Revenue Service (IRS) ruling that could provide significant relief.

401(k) Student Loan Benefit Program

Repaying student loan debt can sometimes be challenging—and the amount of student debt in the United States is enormous: at least $1.5 trillion .

Perhaps even more alarming, this amount has nearly tripled over the past 10 years , and so people owing student loan debt are understandably looking for help in repayment.

Fortunately, on August 17, 2018, the IRS made a ruling that could start to provide relief. This ruling came in the form of a private letter , #201833012. The IRS was responding to a specific request from Abbott Laboratories, but implications could be much larger in scope, making it much easier for employers to assist employees who have student loan debt.

Abbott Laboratories, the impetus behind this ruling, asked to be allowed to modify the 401(k) program offered to its employees to include student loan benefits. More specifically, they would still put 401(k) contributions into employee retirement accounts when the employee is repaying student loans, but not contributing to the 401(k) plan.

Student Debt Impact on Retirement Savings

The Center for Retirement Research at Boston College delved into whether or not growing student loan debt has affected how much people with this kind of debt are saving for retirement. Results are mixed, yet still illuminating. Findings include:

•  Student loan debt doesn’t seem to have an impact on whether someone actually participates in a 401(k) program
•  Asset accumulation remains about the same for non-graduates
•  Graduates who have student loan debt accumulate, on average, 50% less in their retirement accounts by the age of 30

The amount of the student loan debt owed doesn’t seem to play a role in this reduced retirement account accumulation. Just the fact that the debt exists, the study authors determined, “looms large in their financial decision-making.”

So, it isn’t unreasonable to conclude that, when people get help with their college debt, such as with this student loan 401(k) perk, it might result in a positive uptick in retirement savings, as well. Win/win!

Abbott Laboratories

As the Society For Human Resource Management reports, Abbott Laboratories, in response to the IRS’ ruling, created their Freedom 2 Save program , which allows qualifying employees (both full-time and part-time) who are putting 2% of their eligible pay toward student loan repayment to receive the “equivalent of the company’s traditional 5% ‘match’ deposited into their 401(k) plans, without any 401(k) contribution of their own.”

Abbott started this initiative because they recognized that they were seeking top quality talent—with degrees in science and engineering, business development and so forth—which means they wanted students who likely were being aggressively recruited by other desirable companies.

To attract and retain them, they pursued the right to offer this unique benefit to them. An estimated 2,500 to 3,000 employees currently at Abbott are expected to take advantage of this benefit.

Student Loan Employer Contributions

According to The New York Times , 4% of employers were offering student loan repayment benefits of some kind in 2018, up from 3% in 2015.

While this percentage is still small, it is expected to grow . According to the article, these more typically consist of employees being given a lump-sum, after-tax payment to help with student loan debt. These payments are sometimes paid monthly; other times, annually.

An article in Forbes shares benefits that companies are offering to help employees pay down this kind of debt in 2018. Fidelity, for example, offers eligible qualified employees up to $2,000 annually towards repayment of their student loans, up to $10,000 overall, through their Step Ahead Student Loan Assistance program.

Because this is paid monthly, if an employee receiving this benefit leaves the company, none of the money needs to be reimbursed to Fidelity. The healthcare company, Aetna, offers a similar program, and Penguin Random House is the first book publisher to offer this type of benefit. They provide $1,200 per year/$9,000 total for full-time employees who’ve been at the company for at least one year.

Refinancing Student Loans at SoFi

Whether you work at a company that offers these types of programs or not, it may make sense to refinance your student loan debt, consolidating outstanding balances into one convenient loan—and at SoFi, qualified borrowers can refinance both federal and private loans at one lower interest rate or a shorter term.

You’ll want to decide if you want a shorter term to pay off the debt more quickly and pay less interest over the life of the loan—or a longer term that may lower your monthly payment and free up your cash flow. Whichever you decide, the choice is available at SoFi, and we charge no fees. None.

The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC .
This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice about bankruptcy.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Parent PLUS loans can be an important tool when it comes to funding your child’s college degree. When your child has gotten back his or her financial aid offer and counted their Stafford loans and Pell Grants, you might find you fall a little short. After all, the Department of Education’s budget doesn’t always account for skyrocketing college fees. That’s why the Parent PLUS loan program has gained popularity over the last 30 years. In 2017, there were around 3.5 million Parent PLUS borrowers ; the average Parent PLUS package is around $15,880 a year. Stafford loans may not cover the total cost of college; Parent PLUS loans can help fill in the gaps.

So what exactly are Parent PLUS loans? They are simply loans issued by the federal government for graduate students or parents of undergraduates. What makes them different from any other type of federal student loans? Unless you’re applying for them as a grad student, these loans are issued in the parent’s name, not the student’s. Financial responsibility, therefore, lies solely with the parent and any cosigners, not the child.

The nitty-gritty details can be a lot to handle. That’s why we made you this Parent PLUS loans guide—we’ll take you through how to apply, how much you could receive, and how much you could pay in interest.

What are Parent PLUS loans?

Parent PLUS loans (also known as Direct PLUS loans) are federal loans offered to parents of undergraduate students. Graduate students are also eligible for Direct PLUS loans, although in the case of grad students, the students themselves who apply for the loan. The interest rate for Parent PLUS loans is set once a year, and because these are fixed-rate loans, the interest rate doesn’t change throughout the life of the loan.

At the moment, the interest rate for Parent PLUS loans is about 7.6% . There is also a loan fee on all Direct PLUS Loans; as of October 1, 2018 that fee will be nearly 4.25% of the loan amount (which is deducted from each loan disbursement proportionately).

How much can I borrow?

The maximum amount you can borrow for a Parent PLUS loan is simply the cost of attendance (as determined by your child’s school), minus any grants or scholarships (or any other financial aid) your child may have received.

How do I get a PLUS loan?

Before applying for a PLUS loan, you will need to fill out and submit a FAFSA® to see what additional aid your child may qualify for. After that, the financial aid process really depends on the school in question. You may want to call the financial aid office of your child’s school before you apply for a PLUS loan, since different schools require different information. Many colleges will require you to fill out the application online. Note: This application takes about 20 minutes to fill out, and it will include a credit check.

What happens if I get rejected?

If your PLUS loan application is rejected based on what they call “adverse credit history,” you may still have options. You can seek out an endorser—which is someone who qualifies and who will agree to pay the loan back in the event that you are unable to. In addition, if you don’t qualify for a PLUS loan on your own, you will be required to go through PLUS credit counseling .

If there are extenuating circumstances impacting your credit history, you can submit documentation to support your appeal to the Department of Education (they provide a list of extenuating circumstances they will recognize if you’re having trouble getting approved for a Parent PLUS loan.)

If you continue to get rejected, your child may be eligible for other unsubsidized federal loans as a result. Consult with a qualified financial aid advisor for details.

When do I have to start repaying?

As a Parent PLUS loan borrower, you will have to start paying back the loan as soon as the entire amount is disbursed. You can, however, request to defer payment while your child is in school—as long as they are enrolled at least part-time. You can even request a six-month grace period once your child finishes school or drops below part-time enrollment. But remember, interest accrues even while payment is deferred.

What happens if I lose my job?

In the event of unemployment, borrowers can contact the Department of Education to request forbearance on the loan. If you are permitted to enter forbearance, you won’t have to make monthly payments for up to three years. However, interest still accrue during forbearance, so your debt will likely increase by pausing payments.

Pros and Cons of Parent PLUS

Pros of a PLUS loan

Parent PLUS loans are federal loans, which means they enjoy most benefits that come with federal loans. For one thing, interest rates are fixed for the life of the loan, so your interest rate will not change or go up from the time your loan is first disbursed. Under certain circumstances, federal loans may be forgiven, cancelled, or discharged.

Cons of a PLUS loan

If federal loans are taken out in the parents’ name(s), the parents assume total financial responsibility for the loan—they cannot transfer responsibility for paying off the Parent PLUS loan back to their child. As parents near retirement and their child becomes capable of paying back his or her loans, it might make more sense to refinance their Parent PLUS loan and transfer the debt into the child’s name.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit .
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SLR18120

If you’re an attorney and considering or planning on moving from the public to private sector, you’ve surely got a head full of questions about what the transition means for your career, your personal life, and your financial life.

There are plenty of good reasons for moving from nonprofit to private sector. One of the most common is to earn more money and progress a career in a way that is not possible at a public sector job. Even with better salary prospects and upward mobility, such a move can feel incredibly daunting. Any lawyer who used to work in the public sector may face challenges during this transition.

If you’re making the switch, it can be helpful to understand some key differences between the two work environments to make a successful transition. This can include such factors as the nature of the work and workplaces and what’s expected of employees. Here, we’ll discuss a few new ways to view the roles so that you’re able to maximize your success both before and after your transition, along with tips on how to find success in your new role.

Differences in Working Public Sector vs. Private Practice

Understanding how private practices operate in comparison to a job in the public sector will help you know how to be successful within each system. Navigating a job in both sectors requires understanding the underlying organization and motivation.

A lawyer in the public sector, for example, working as a public defender or for a public interest organization, is generally tasked with their own cases very early on in their career. Working in the public sector can give lawyers some incredible experience when they’re in the beginning stages of their career.

That said, you’d likely only want to move to a private practice with a role as counsel or even partner (at a boutique firm, for example); otherwise, you may be given work that can feel more administrative.

The difference between for-profit and nonprofit work lies greatly in the motivation of the two. At a private practice, the primary goal is to generate profits via clients, who are at the nexus of any private business. For a person working at a private practice, that could mean spending significantly more time doing such tasks as networking and the acquisition of new business.

Bringing in new money is often a core responsibility for younger lawyers without established clientele at a private practice. This is generally not the case in the public sector, where there is no shortage of work—and, as it often goes, a lack of resources to match.

In moving from nonprofit to private sector, it would behoove you to brush up on your networking skills and beef up your LinkedIn profile. You may be asked to wine and dine potential new clients, and your long-term success will at least somewhat depend on your ability to leverage the networks you’ve created over the course of your life and career.

Networking isn’t just important externally, though, it’s also important internally. Whether you’ll be given desirable work, be passed along clients from other (retiring) lawyers or be considered for promotions will be dependent not only on the quality of your work, but also your involvement in the firm on both a professional and personal level.

Be sure to join your local bar association and an internal group or two, such as leadership panel, a women’s group, or take a side (read: non-billable) role as an unofficial event planner. At a private practice, the extra effort will be noted and rewarded.

Benefits of Private Practice Over Public Sector

It’s not exactly a secret that many people will move from the public sector to the private sector to pursue an opportunity to earn more money. Oftentimes, career growth can feel stagnated in a public sector job as there aren’t always defined ladders to climb like there are within a private practice. Career progression means gaining tenure, as opposed to making big jumps up through job titles and pay scales.

Within the profession of law, there is a significant difference between the salaries of those working in the public and private sectors. According to the National Association of Legal Professionals, the starting salary for public defenders is $58,300 and is $48,000 for those working in civil legal services.

Comparatively, some private law firms in big cities such as New York and Los Angeles are paying their entry-level attorneys $180,000, which as the NAPL observes “is beyond what even the most experienced attorneys can reasonably expect at a public interest organization.”

Handling Student Loans in the Public Sector vs. Private Practice

There are other financial considerations when switching from the public to the private sector, especially for those in the process of paying back federal student loans.

Many people take jobs in the public sector because they’ll qualify for student loan forgiveness after 120 qualifying on-time payments (usually about 10 years) through the Public Service Loan Forgiveness program. A switch to the private sector before making 120 qualifying payments could mean a delay in progress on payments you’ve made towards the program.

Conversely, because moving to a private sector job usually means a higher salary, especially in the legal field, having a higher consistent salary provides its own unique benefits aside from the obvious—more money to spend and enjoy. For one, making student loan payments and paying out of pocket for benefits like health care take a smaller representative proportion of take-home pay, making the bills feel less burdensome overall.

Additionally, a higher salary means that you may qualify to refinance your student loans to a lower rate of interest, saving you money over the life of your student loans. (Of course, a higher salary is just one qualifying factor of refinancing—it will also help if you have a good credit score and credit history.)

Refinancing student loans is the process of swapping out any old loans—private or federal—for a new loan, ideally with a better rate of interest. You can refinance through a bank or other financial services provider.

It could be the perfect time to refinance if you’re making a switch to a position with a higher salary in the private sector, as salary is one important factor when being considered for student loan refinancing.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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