Student loan debt forgiveness and you

Many recent graduates are waiting to learn whether the Supreme Court will approve the Biden administration’s student loan forgiveness plan. And while we can’t predict what decision on debt relief the Supreme Court is likely to 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 have helped thousands of families avoid millions of dollars in student loan debt by educating them about ways to avoid or minimize borrowing,” says Roberts. “I am the author of Route 529: A Parent’s Guide to Saving for College and Career Training and am 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 you can manage your student loans as you wait for the Supreme Court decision.

Those questions are below, along with her answers.

How can current students avoid student loan debt?

Current students should be making every effort to finish their degrees on time to avoid increasing the total cost of their post-secondary studies and to avoid accumulating additional student loan debt.

How can new graduates manage their student loan debt?

Students who will be graduating with student loan debt should be looking for post-graduation employment opportunities with employers who are willing to provide assistance with student loan repayment.

While some employers were already offering 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 can, through January 1, 2026, offer up to $5,250 in tax-free student loan repayments for each employee.

What’s great about this is that the payments are not counted as taxable income to the employee, are not subject to payroll tax for the employer, and can be taken as a business tax deduction by the employer as well. That’s a win for the employer and a win for the employee!

Should new graduates choose employers based on student loan benefits?

Current students should inquire about student loan benefits when looking for opportunities to kick off their careers and recent grads who are already employed should see if their current employer might consider offering assistance if they are not already doing so.

Your employer may not be aware of the tax benefits they could receive by providing student loan support—so talk to your human resources department and see if they can get the ball rolling. If the student loan forgiveness plan passes and you wind up not needing your employer’s assistance, you’ll still have helped other employees who may need it now or in the future.

What should graduates do as they wait for student loan forgiveness?

If you are eligible for student loan forgiveness but faced with uncertainty while you await the upcoming Supreme Court decision, here is my advice:

Set aside as much money as you possibly can toward your outstanding student loan balance while you await the outcome. If you are taking advantage of the interest-free pause on student loan payments, consider saving the value of what your payments would have been (if you haven’t already been doing this). You can also cut back on everyday spending, or set aside a portion of any upcoming tax refund or compensation bonus you may receive.

After the final decision is rendered and you determine exactly how much you still owe on your student loans, you can make a lump-sum payment toward your principal while the zero-interest payment pause is still in effect.

If the Supreme Court decision turns out favorably and you wind up not needing the money you saved to repay outstanding student loan debt, the funds will be a tremendously valuable for rainy day purposes or as a nest egg for future financial goals.

What else can recent graduates do to manage their student loans?

Whether you’re a recent graduate or a current student, I would invite friends and extended family to contribute toward 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 wind up spending money on gifts that you don’t need.

Through a crowdfunding site like GiftofCollege.com, you can create a profile, connect your student loan(s) and invite others to contribute in amounts starting at $25. It can take a village to pay for higher education, and loved ones may welcome the opportunity to lighten your load by helping to pay down your outstanding debt.