Student loan debt is now the second-largest form of consumer debt in the U.S. Of those impacted, millennials are by-and-large the majority.
Now, millennials are asking employers to consider student loan contributions over other benefits.
In an IonTuition survey, 75 percent of respondents said they would prefer employer contributions to student loan payments over traditional 401(k) plan benefits.
The IonTuition study offers additional data on younger workers and employee benefits:
- 8 out of 10 of respondents would like to work for a company that offers student loan repayment benefits.
- Two-thirds would prefer monthly contributions to their student loans over 401(k) benefits compared to 43 percent and 49 percent in previous surveys.
- 37 percent of respondents are unsatisfied with their current student loan repayment plan and 21 percent are not knowledgeable of their repayment options.
The study data comes at a time when student loan debt is skyrocketing – it stands at $1.5 trillion in the first quarter of 2018.
Yet, only 13 percent of study respondents say that their employer actually offers student loan repayment assistance, even as 70 percent of respondents say that employers should help staffers make their student loan payments. Matching contributions toward student loan payments are the most preferred employee benefit – 66 percent say they want matching contributions, up from 49 percent in a similar study from IonTuition in 2017.
Employers on Board
Some employers are supporting calls for student loan repayment assistance with programs of their own.
Richard Pummell, HR lead at Develop Intelligence, in Boulder, Colo. said, “Approximately two years ago I led a human resources team that rolled out a student debt repayment program to an organization of approximately 150 employees,” he said. “We surveyed employees to determine their level of student debt and to determine if they would be interested in participating in such a program.”
The results on the amount of indebtedness were staggering. In some cases student debt was in excess of $100,000 and the employee’s salaries were 40 percent of the debt owed.
“We offered to make payments directly to the debt servicing organizations on an annual basis to ensure the debt was paid down and the benefit was applied directly to the loan,” Pummell said. “All eligible employees did enroll in the program, and it was incredibly popular.”
Develop Intelligence funded the payments on the student loan debt through the anticipated savings coming from employee retention.
Cutting Down Student Loan Debt
There’s little doubt that companies could play a huge role in getting younger employee out from under the burden of student loan debt.
But there’s a problem, says Jacob Lunduski, financial industry analyst at Credit Card Insider. “The problem is that more than 44 million Americans have more than $1.5 trillion of student debt, according to the Federal Reserve Bank of St. Louis,” Lunduski said. “That number is growing every day.”
Even relatively small student loan contributions could make a big difference to borrowers.
“Reuters reported that a monthly payment from employers of $100 towards a student loan of $26,500 with 4 percent interest could cut down the length of the loan by about three years,” Lunduski said.
While employees earn the obvious benefit of getting their student loan debt paid down, companies who offer college loan repayment assistance get some benefits, too.
“Companies should do both 401(k) plan benefits and student loan repayment help if they can,” says Matthew Burr, human resources consultant at Burr Consulting, LLC in Spencer, N.Y. “Doing both will provide recruitment and retention capability for companies.”
While millennial-age career professionals would love to have both types of employee benefits, the frustrations over paying huge student loan payments can produce unexpected outlooks on the student loan repayment versus 401(k) plan debate.
“I’m a millennial worker who started with $32,000 in student loan debt,” said Lauren Crain, digital marketer at Health Labs, in Houston, Texas, “I’ve been overpaying it for five years, and I now owe $28,000. To see those numbers side by side is discouraging.”
Crain said she’d much rather have contributions to her 401(k). “It’d be significantly better to see an account grow than to watch hopefully for an account to minimally reduce. Plus, I’ve pretty much come to terms with the fact that I will be paying off my student loan debt well into my 40s, and I’ve accepted it.” She said, “I’d rather have solace that I’ll be able to take care of myself in my golden years than to see small payments on my student loan that will hardly help.”
Brian O’Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC’s Guide to Creating Wealth. He’s a regular contributor to major media business platforms. Brian may be contacted at firstname.lastname@example.org.
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