Compliance December 23, 2021

The Biden Administration Extends Student Loan Repayment Pause Through May 1

Biden says the extension is meant to acknowledge that millions of borrowers are still coping with the negative financial impacts of the pandemic.

Reported by

President Joe Biden and the Department of Education have announced an extension of the federal student loan payment freeze until May 1, 2022, citing the impact the pandemic is having on the economy.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

In a statement announcing the policy extension, the president said that while the current jobs recovery has been one of the strongest ever, he knows millions of borrowers are still coping with the impacts of the pandemic and need some time before repayments begin.

“Given these considerations, today my administration is extending the pause on federal student loan repayments for an additional 90 days—through May 1, 2022—as we manage the ongoing pandemic and further strengthen our economic recovery,” Biden says. “Meanwhile, the Department of Education will continue working with borrowers to ensure they have the support they need to transition smoothly back into repayment and advance economic stability for their own households and for our nation.”

The extension will allow the administration time to assess the impacts of the Omicron variant on student borrowers and provide borrowers with additional time to plan for the resumption of payments, the Department of Education says.

Borrowers are living through an unprecedented economic period, suggests a Student Debt Crisis survey of more than 33,000 student loan borrowers. Even though over 68% of the survey’s respondents are fully employed, nine out of 10 student loan borrowers report they are not ready to resume payments in February. Respondents say student loan payments will eat a large portion of their income and prevent them from affording bills and such things as rent, car loans and medicine.

The study also found that 27% of respondents say one-third of their income, or more, will go toward student loans when payments resume next year. Some 21% say they will never be financially secure enough to resume payments again.

TIAA’s “2021 Nonprofit Student Debt” survey found that student debt is a significant source of negative emotions. A majority of workers (55%) still worry about their student debt. Three in 10 have only negative feelings about their student loans (31%). 

Over a third of nonprofit and public sector workers (36%) say they will be unable to make their payments from either their take-home pay or savings, TIAA found. Additionally, 11% say they will need to turn to their friends and family for financial assistance. Another 11% say they will reduce or stop their retirement plan contributions, and 10% will have to ask for additional forbearance. The last 4% say they just aren’t sure at all where the money will come from. 

When Biden announced the payment pause extension, he also urged federal student loan borrowers to do their part by taking full advantage of the Department of Education’s resources, which are intended to help borrowers ensure they’re prepared for payments to resume, says Jennifer Nuckles, SoFi at Work executive vice president and group business unit leader.

“We recommend employers consider themselves part of this call-to-action and use the next 90 days to consider the ways your organization might help ensure the workers you employ are ready to enter repayment, if you aren’t already doing so,” Nuckles suggests.

The Coronavirus Aid, Relief and Economic Security (CARES) Act included a provision that allows employers to provide $5,250 annually for an employee’s student loan repayment or tuition reimbursement through 2025. This new provision benefits both the employee and employer—the employee gets to avoid paying income tax on the student loan payments, while the employer gets a payroll tax exclusion.

Additionally, some companies have implemented programs that provide a matching contribution to employees’ retirement plans for every payment they make to their student loan debt. This will help to ensure employees aren’t forced to choose between paying off student loan debt today or building their retirement savings for the future.

“President Joe Biden’s decision to extend the pause on student loan repayment an additional 90 days underscores the urgent need for a holistic, employer-driven push for workforce-wide financial literacy in our country,” Nuckles adds. “Nearly every business relies on—and benefits from—the investment employees have made in higher education, whether that’s through obtaining professional certifications and/or earning undergraduate and advanced degrees; yet a majority of employers still don’t offer financial well-being benefits today.”

Compliance December 23, 2021

Birdthistle Takes Helm at SEC Division of Investment Management

SEC Chair Gary Gensler says he looks forward to working closely with William Birdthistle, an at-times harsh critic of the mutual fund industry, to plan and execute a proactive regulatory agenda.

Reported by

This week, the U.S. Securities and Exchange Commission (SEC) announced the appointment of William Birdthistle as director of the Division of Investment Management.

Birdthistle currently serves as a professor at Chicago-Kent College of Law. The SEC division he will lead oversees regulatory policy for investment advisers and investment companies, including mutual funds and other investment products and services relied upon by investors.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

SEC Chair Gary Gensler cites Birdthistle’s “remarkable expertise in investment funds” as a primary reason for his appointment, and, in a statement about the move, he thanked Sarah ten Siethoff for serving as acting director of the Division of Investment Management during his first eight months as SEC chair.

“The Division of Investment Management develops regulatory policies to oversee investment companies and investment advisers so that American investors can confidently save to buy homes, pay for college or plan for retirement,” Gensler adds. “I look forward to working closely with William to execute our mission.”

As spelled out by the SEC, Birdthistle joined the faculty at Chicago-Kent College of Law in 2006. He also has served as a visiting professor of law at the University of Chicago Law School. His research explores the interplay of investment funds, securities regulations and corporate governance, and he has served as counsel of record on multiple amicus briefs to the U.S. Supreme Court.

Prior to his academic career, Birdthistle practiced law at Ropes & Gray in Boston, serving as a corporate associate in the firm’s investment management practice. Birdthistle received his Juris Doctor from Harvard Law School, where he served as managing editor of the Harvard Law Review, and he received a bachelor’s in English and psychology from Duke University in 1995.

At a high level, Birdthistle’s selection fits into the trend seen in prior SEC appointments made by the Biden administration, as it is taking a clear change in direction relative to the prior administration, which put the focus of the SEC squarely on expanding access to investments and easing regulatory restrictions on advisers and investment companies. Gensler, on the other hand, has emphasized the need to more aggressively police conflicts of interest and other problematic behaviors seen in the securities markets and among its practitioners. To this end, in May, the SEC announced it had appointed Barbara Roper, former director of investor protection at the Consumer Federation of America (CFA), to the role of senior adviser to Gensler.

Birdthistle is known for his involvement as an expert witness in several important lawsuits in recent years, including Kennis v. Metropolitan West. In that case, Birdthistle offered pro-plaintiff testimony that suggested, in sum, that the mutual fund industry is insufficiently competitive to ensure arm’s-length bargaining on fund fees. He also opined that certain compensation structures used for portfolio managers can create incentives contrary to the financial interests of fund investors and shareholders, and that there are potential conflicts arising from certain payment of sub-accounting fees to financial intermediaries from fund assets for distribution.

Among his many publications, Birdthistle has also written about problems in the money market fund industry, with a particular focus on the market stresses seen in the wake of the Great Recession. In one paper, he argued the SEC’s response to the 2008 financial crisis actually increased, rather than decreased, the likelihood of future failures in money market funds and the broader capital markets. He wrote that the SEC “endorses practices that obfuscate rather than illuminate the capital markets, including fixed pricing for money market funds, potentially riskier portfolio requirements and the continued use of discredited ratings agencies.”

“These policies, premised implicitly upon doubt in the ability of markets to process information effectively, obscure the true perils of money market funds,” Birdthistle writes in “Breaking Bucks in Money Market Funds.” “Rather than swaddling investment risks in misleading regulatory padding, the SEC should illuminate the possible menace of these funds. This article offers transparent solutions to alleviate moral hazard and systemic risk in the broader market and to end the regulatory subsidy of these specific investments.”

«