Whether you have student loans or not, understanding the terminology surrounding student debt is easier said than done. That’s part of the reason why Peanut Butter exists — to make it easy to tackle student debt!
Many people find it particularly challenging to understand the different entities involved with student loans, such as lenders, servicers, borrowers, employers and employees, and how they all interact with each other during the life of a loan.
If you’re an employer who is considering offering Student Loan Repayment as a benefit, it may be helpful to first understand the differences between these entities, and how Peanut Butter works with each one to make things as smooth as possible for everyone involved.
A student loan’s life begins when it is taken out by a borrower (student) to pay a college or university for tuition.
Borrower: A borrower is a person that has received money from another party with the agreement that the money will be repaid. If you have student loans, you are the borrower.
The borrower takes out the student loan from a lender with a loan agreement stating that the borrower will pay the money back over time.
Lender: The lender is the organization that funded the loan; the lender for most student loans is the U.S. Department of Education (DOE) but it could also be the borrower’s school, a bank, credit union, or another financial institution.
The lender then hires a loan servicer to collect the money from the borrower for them.
Loan Servicer: The loan servicer provides borrowers with their student loan statements and is responsible for collecting student loan payments. Loan services will also help with any questions or concerns the borrower may have about their student loans, such as choosing the right repayment plan or deciding if they qualify for loan forgiveness.
But what about borrowers participating in an employer-sponsored Student Loan Repayment benefit, you might ask?
When a company offers Student Loan Repayment, employees who are borrowers of student loans may elect to participate in the benefit. For each borrower who participates, Peanut Butter collects the employer’s contribution, then sends it to the loan servicer as an excess payment (in addition to the borrower/employee’s payment) so the employee can get out of debt faster!
Here’s an example:
Susan Tinderbrook attended Illinois State University from 2013-2017. Unable to afford the full cost of tuition on her own, Susan took out a student loan from the Department of Education (the lender). The Department of Education hires Navient as a loan servicer, so each month, Susan makes a loan payment to her Navient student loan account.
In 2019, Susan takes a job at Crossroad Technologies, a company that contributes $50/month towards eligible employees’ student loans as part of a Peanut Butter Student Loan Assistance program. As an eligible employee, Susan elects to receive Student Loan Assistance and enrolls online in less than five minutes.
Now, every month, Susan has a monthly contribution of $50 applied directly to her Navient student loan account by
Peanut Butter on behalf of Crossroad Technologies. Susan can keep track of her employers’ contributions on her Peanut Butter dashboard and receives a confirmation email each time a payment is applied to her Navient account. For Crossroad Technologies, this is a great way to remind employees like Susan that they’re helping out each and every month.
Become a part of the solution to your employees’ student debt challenge today.