loans- can't pay due to status change

[Guest prowcite]

Several employees have changed to hourly or part-time status and their new pay will not cover their loan repayment amounts.

It is not possible to reamortize the loans to lower the payments since the terms already are at the maximum 5 years and some have only 1-2 years left.

There is the one-year extension for leave of absence but that does not apply in this case.

Besides defaulting on these loans, what are some other options?

If our recordkeeper will accept personal checks, I suppose we could offer that but I don't want to have to offer that for all active employees or terminated employees if they catch wind of this.

Thanks in advance for your suggestions.

[rcline46]

As always - Read the Fine Document. What does the loan program say? If it is conditioned on payroll deductions, then the loans will go into default based on the new regs. Maybe the document gives the trustee discretion in how to get payment or to change method (not timing) of payment.

If the document is silent, then make one allowing trustees whatever discretion they want. Or change the current procedure such as 'when a payroll is not sufficient to make a loan payment when due, the trustee may accept a personal check for said payment'.

Make life easy, not hard!