February 12, 2020 11:00 PM PT

This Company May Be Student Loan Debt Crisis's Biggest Hope

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With today's student loan debt weighing heavy at $1.4 trillion in the United States and growing larger by the day, we are in dire need of solutions. With a focus centered on helping great companies and their people with student loan debt thrive, Gradifi may be the student loan debt crisis' biggest hope.

Who is Gradifi?

Gradifi, acquired by E*TRADE, provides financial benefits to employers and ultimately their employees through several multi-faceted tools that include student loan debt management through employer contribution, refinance options, and savings programs for future educational needs.

Who Benefits From Gradifi?

Employee Participation Benefits
Employees with student loan debt benefit from Gradifi's plan through several products:

  • Student Loan PayDown Plan
    Gradifi's Student Loan PayDown Plan contributes to the employee's financial well-being by the means of employer contribution to student loan debt. This benefit alone helps the employee make better use of their money by reducing the principal balance of their student loans, which also saves interest over the life of the loan.

    Sarah Saved on Total Interest Paid: Sarah saved interest over the life of her student loans when her employer contributed funds to her outstanding student loan debt. Here is how it worked for her:

    Sarah owed $25,000 in student loans, with a 10-year term and a 6% interest rate. Over the life of her loan, she would pay $25,000 in principal and $8,306.15 in interest.

    The employer contributed $6,250 to Sarah's student loans during the first year of her employment. After the contribution, she owed $18,750 in principal and $6,229.61 in interest over the life of her loan.

    Not only did the employer contribution lower the amount of interest that Sarah paid over the life of her loan by $2,076.54, it also gave her the opportunity to reduce her student loan monthly payment from $277.55 to $208.16, which freed up income for Sarah to either save or to more efficiently manage her own well-being on a monthly basis.

    Additionally, Sarah now had the opportunity to continue paying the $69.39 difference in payment as an extra monthly payment, which could save an additional $2,043,76 in interest over the 10-year repayment plan.

  • College SaveUp
    Gradifi's College SaveUp plan helps employees save for their children's education through direct payroll contributions to their 529 college savings plans.

    What are 529 savings plans?
    529 savings plans are powerful tax-advantaged tools to help individuals save for college on behalf of a designated beneficiary. Learn more about qualified expenses, advantages, and disadvantages here.

  • Gradifi Refi
    Employees can register and receive access to refinance offers from Gradifi's leading lenders. This links employees to refinance offers exclusive to Gradifi's program.

    Student loan refinance can help a borrower manage their financial life through a reduction in monthly payments and can also save interest over the life of the loan if the refinance results in a lower interest rate.

How do I talk to my employer about enrolling in Gradifi?
Download Gradifi's information packet and give it to your employer's HR department.

Employer Participation Benefits
By offering contribution benefits through Gradifi's Student Loan PayDown Plan, employers may increase their rate of employee retention.

Gradifi compares employee retention percentages as:

  • 40% of employees are likely to stay at their current job without the SLP Plan benefit.

  • 58% of employees are likely to stay at their current job with the SLP Plan benefit.

  • An increase in retention for an employer results in monetary savings through a reduction in training needs as well as less money spent on seeking and recruiting new employees.

Employees sign up directly with Gradifi, which saves the employer administrative time and money that they would have spent maintaining their own student loan reimbursement program.

Online reports are readily available to employers to review and approve contributions before they are made, as well as review who has signed up for plans.

Gradifi handles the employee sign-up process as well as customer service relating to the onboarding.

Are you an employer interested in signing up or receiving additional benefit information from Gradifi?
Contact Gradifi and request a demo here.

Reasons Student Loan Borrowers Might Want To Look Elsewhere

Early Loan Payoff .
Before you take the plunge to pay off your student loans early through an employer repayment loan assistance program, make sure this is exactly the step you need or want to take.

Consider these two main points before paying off student loans early:

  1. Loan Forgiveness
    You might be eligible for loan forgiveness. Are you a teacher, nurse, doctor, or have you served in the military? Are you working for a government agency or a nonprofit?

    Loan forgiveness can wipe out a chunk of (and sometimes all of) your outstanding student loan debt, especially in the case of loan discharge. Never commit any amount of money towards paying off your student loans before determining if you are eligible for loan forgiveness.

  2. Tax Deduction
    Do you need the tax deduction that your student loan provides?

    If your employer were to make contributions to your student loans, would the tax liability throw you into a situation where you end up paying more income tax than you would if you had not paid a portion of your student loan off early?

Student loans offer savings through interest tax deductions. If you meet the following requirements, you can write off a maximum of $2,500 paid in student loan interest:
  • You are not claimed as a dependent on anyone's tax return. *

  • You are obligated to pay interest on a qualified student loan.

  • You paid interest on a qualified student loan.

  • Your filing status is not married and filing separately.

*If you are a parent and claim the student loan, you MUST claim your child as a dependent on your tax return.

529 Plans
If you're considering signing up for one particular 529 Plan with one lender, educate yourself first on how 529 plans work. Know the key advantages and disadvantages of 529 savings plans.

Compare plan interest rates and qualifying criteria between lenders. Your employer, for example, may only allow you to save for your children's education through payroll deduction. However, 529 Plan options typically allow you to save for qualified education expenses for any person you claim as a beneficiary.

Refinancing Student Loans
Always shop around for the best interest rate and repayment term options when refinancing your student loans. You may receive several attractive refinance offers from recommended lenders through programs you are enrolled in, but the proof is found by completing your own comparisons.

Educate yourself on what to look for in a student refinance loan before you sign on the dotted line of a refinance contract.

Steve Saved with a 1.25% Reduction in Interest Rate: Steve was tempted to accept the first student loan refinance offer that came his way. He didn't want to spend the time to shop around. But he is now thrilled that he put in the effort because he knows how much the 1.25% reduction in interest will save him over the life of his student loans.

Steve's loan balance is $25,000. He accepted a lender's refinance offer with an interest rate of 5.55%, instead of the 6.80% offer from another bank. The refinance resulted in a monthly payment of $271.94, with cumulative payments over the life of the loan of $32,632.08 and total interest paid of $7.632.08.

If he had chosen to not compare refinance offers among banks, he might have settled for the higher interest rate offer, which would have cost him an additional $15.76 in monthly payments, as well as $1,892.06 additional interest paid over the life of the loans.

Final Words
Always research your options when considering payoff or refinancing of your student loans. Make the choice to not grab up the first offer that comes your way.

Gradifi may be the biggest hope for your student loan situation, yet, if you don't do the homework, you might miss out on what works best for your outstanding student loan debt. Your bank account could be much healthier over the next decade if you take the time to comparison shop.

More from CreditDonkey:

Pay Off Student Loans Fast

How Do Student Loans Work

How to Get Rid of Student Loans

Student Loans

529 Qualified Expenses

Whether you are saving to fund future college education expenses or participating in prepaid tuition to fund a beneficiary's education expenses, enrollment in a 529 plan is a powerful, tax-advantaged tool.

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How Much Will My Student Loan Payments Be

Average student loan debt is around $35,000. But the type of loan, interest rate, and other factors will determine how much they'll actually cost. See an estimate of how much you can expect to pay each month.

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