HOUSTON – (COMMERCIAL THREAD) – AIG Retirement Services, a leading provider of retirement plans for tax-exempt and public sector employers, today announced the results of a new study on how employees of organizations Nonprofit and public service are considering student loan debts, student loan forgiveness and the Public Service Loan Forgiveness Program (PSLF).
Millions of public sector and nonprofit workers, including teachers, healthcare workers and first responders, may be eligible for a student loan forgiveness through the PSLF, but confusion around the program appears to be undermining its efficiency. While 90% of public service employees with debt at the college level indicate that they are familiar with the program, 70% presents only a minimal understanding of its rules and requirements.
This gap is significant because more than one in six American adults has a federal student loan, according to the most recent figures from the New York Federal Reserve’s Center for Microeconomic Data released in 2018.1 The Federal Reserve estimates the total student debt to be $ 1.7 trillion,2 and $ 500 billion in new debt will be incurred over the next five years, according to a 2020 Congressional Budget Office report.3
“The Public Service Loan Forgiveness program is a powerful tool for Americans who have chosen to dedicate their careers to service and community,” said Rob Scheinerman, CEO of AIG Retirement Services. “It is encouraging to see a high level of awareness of this important program, but worrying to see such a high level of confusion around the rules and requirements. There is a great opportunity to fill this knowledge gap and help public service employees manage their student loan debt and improve their financial security.
Student Loan Debt The Main Cause Of Financial Stress; PSLF a financial lifeline for public sector employees
Student debt ranks as the number one cause of financial stress for public service employees who have taken out loans from their college years. Almost eight in ten (78%) characterize student debt as a major financial burden. In addition, two out of three (66%) point to student loans and the corresponding monthly payments as a financial worry, surpassing the second highest concern by a whopping 22 percentage points (credit card debt at 44%).
With these concerns as a backdrop, public service employees see the PSLF program as an essential lifeline to their financial well-being. More than one in three (34%) say that this will be the only way for them to pay off their debt within a reasonable time, and 64% say it will reduce financial stress.
Additionally, a significant number of public service employees would use money otherwise spent on monthly student loan payments for other important financial responsibilities – more than half (51%) say they would most likely use the funds to pay off other debts; 47% contribute to retirement savings and investments; and 43% would add to their emergency savings fund.
Despite support for the PSLF, obstacles to the program persist
The PSLF program is clearly supported, with 68% respondents indicating that they are likely or very likely to work to reach their qualifications. Three out of four (77%) expect to tell others about the program, and 84% find the program attractive with half of those who say it is very attractive.
But despite this enthusiasm, there are significant barriers to successful participation in the program. Survey respondents indicate that the main obstacle to canceling the loan through the PSLF is confusion about the program (34%). Other challenges are maintaining the qualification over time (34%) and the number of payments required (31%).
The PSLF program’s own reports show how these expected hurdles played out, as the vast majority of program applicants saw their efforts to request a loan forgiveness rejected. As of November 30, 2020, the Ministry of Education reports that less than 3% of those who requested PSLF program relief have been approved.4
Opportunity for Public Service Employers to Improve Employee Financial Security
Despite these obvious challenges, opportunities remain. Public service employers have an important opportunity to help their employees take control of their student loan debt. Only 12% of public sector employees with student debt receive information from their employer about the public service loan forgiveness program.
AIG Retirement Services, in collaboration with social impact technology company Savi, last year launched an online tool that public sector employers can provide to their employees to streamline the forgiveness process. The end-to-end digital solution helps determine qualification for student loan cancellation, calculate potential savings, navigate the enrollment process, and maintain program eligibility.
“We understand the long-term impact student debt can have on financial security and retirement, which is why we are proud to work with Savi to help employers empower their employees to take control. their student debt, ”Scheinerman continued. “The new program can chart a course for employees of nonprofits and the civil service towards loan cancellation, helping to improve their financial futures and creating more flexibility around other goals,” including savings for retirement. ”
Methodology of the study
The AIG Retirement Services survey was conducted by Dynata and conducted in October and November 2020, drawing responses from 664 public sector employees, ages 21 to 67, on federal student loans for which they make payments themselves. and working at least 30 hours per week. in government, health care, education and the nonprofit field.
To see more student loan forgiveness survey results and related analysis, visit lifeandretirement.aig.com/employers/lp/the-public-service-loan-forgiveness.
1 Microeconomic Data Center, Federal Reserve Bank of New York, https://www.newyorkfed.org/microeconomics/topics/student-debt
2 Consumer credit G.19. Federal Reserve. https://www.federalreserve.gov/releases/g19/current/default.htm
3 Income-Based Student Loan Repayment Plans: Budget Costs and Policy Options. Congress Budget Office. https://www.cbo.gov/system/files/2020-02/55968-CBO-IDRP.pdf
4 Federal Student Aid Portfolio Summary, Office of Federal Student Aid, US Department of Education, https://studentaid.gov/data-center/student/portfolio
About AIG Retirement Services
For more than half a century, AIG Retirement Services has been a leading provider of defined contribution pension plans for tax-exempt employers and the public sector, including healthcare, Kindergarten to 12th grade. year, higher education, government, religious organizations, charities and other non-profit organizations. AIG Retirement Services manages over $ 100 billion in total assets and manages thousands of plans serving approximately 1.8 million plan members. It includes the VALIC family of companies: The Variable Annuity Life Insurance Company and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company. Additional information can be found at www.aig.com/RetirementServices.
American International Group, Inc. (AIG) is a leading global insurance organization. AIG member companies provide a wide range of property and casualty insurance, life insurance, retirement solutions and other financial services to clients in approximately 80 countries and jurisdictions. These diverse offerings include products and services that help businesses and individuals protect their assets, manage risk and keep their retirement secure. AIG’s common stock is listed on the New York Stock Exchange.
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