Tag: student loans

  • How can you save for retirement when debt is a current reality? Study of 401(k) plans vs. Student Debt Paydowns show that millennials prefer the latter

    July 15, 2019

    Tags: ,

     

    Of the recent college graduating class, nearly 70% took out some form of student loans, and the average student debt upon graduation is $29,800.  The total student debt equates to about $1.5 trillion spread out among 44 million borrowers.  At least the unemployment rate is low.

    Concern about debt will make it difficult for employees to participate in a 401(k) plan, so employers are starting to look at setting up a student loan repayment program.  There are some innovative ideas being put forward that even allow some of the repayment to be treated the same as a 401(k) contribution.

  • Moans and Groans: About Student Loans

    June 28, 2019

    Tags: ,

    The statistics are startling:

    • The total burden of student debt in the United States is $1.4 trillion.
    • In 2017 the median millennial wage was $43,000.
    • In the same year, the median millennial debt was $37,000.
    • 59% of employees 22 to 44 have student debt.

    Debt is the #1 financial challenge to all Americans, and by a wide margin. This lack of fiscal health has a negative effect on both mental and physical health, both of which affect employee performance and motivation.

    In a time of reduced unemployment, the battle for talent and its retention is increasing. How do we get quality employees? What can we offer to keep them? If they stay, how can we help maximize appreciation and thus loyalty? The simple answer is to offer a meaningful compensation and benefits package. The more relevant, and complex, answer is to address specific employee needs and thus create a more meaningful employee experience.

    Medical and retirement may be a given, but how valued are those benefits if debt prevents participation or forestalls fulfilling medical needs? Do employees even know the risks of refusal? What will they deny themselves later by not attending to their long term wellbeing?

    Greater attention is thus being paid to employee education in the basics of finance, while offering products, tools, and services under the rubric of “financial wellness.” One of the key components of such a program is instruction in debt management. New offerings in the student loan sector allow employers to go even further.

    Paying off debt is expensive, with the “load” exceeding the interest earned on savings and potentially the tax and accumulation value of a 401k or other retirement instruments Thus, finding a way to alleviate the stress of a financial burden paves the way to take advantage of a significant savings opportunity.

    A burgeoning cottage industry has developed to help those with student loans, primarily through the channel of employer sponsorship. These services offer:

    • Employer payments to employees to reduce loan balances

    (example – PwC gives employees $100 per month for up to 72 months).

    • Access to lenders who will refinance the loan.
    • Education and counseling, not just on existing debt but how to finance a child’s college education (e.g. using 529 plans).

    For a modest fee, these companies expand the resources for employees, streamline services, help reduce debt, and also create a simplified method of repayment through payroll deduction.

    Various studies have cited:

    • 61% of employers polled said they believe student loan worries have hampered retirement plan participation.
    • 81% of millennials, and 65% of those over 50, want their company to offer student loan tools and resources.
    • A similar percentage of both populations would be more inclined to accept employment with a company that offered student loan tools – or stay with a company if they received student loan benefits.

    Granted, specific studies are skewed to favor the sponsoring student loan services, but there is little doubt that student loans place financial, and thus mental and emotional, stress on employees. Just ask them – and then ask how you can help. The more you can offer, the more appreciative they will be. Recognition and appreciation of a benefit’s value is the cornerstone of a successful compensation and benefits program, after all, so now is a good time to see how you can expand yours in a meaningful way.

  • How can you save for retirement when debt is a current reality? Study of 401(k) plans vs. Student Debt Paydowns show that millennials prefer the latter

    July 15, 2019

    Tags: ,

     

    Of the recent college graduating class, nearly 70% took out some form of student loans, and the average student debt upon graduation is $29,800.  The total student debt equates to about $1.5 trillion spread out among 44 million borrowers.  At least the unemployment rate is low.

    Concern about debt will make it difficult for employees to participate in a 401(k) plan, so employers are starting to look at setting up a student loan repayment program.  There are some innovative ideas being put forward that even allow some of the repayment to be treated the same as a 401(k) contribution.

  • Moans and Groans: About Student Loans

    June 28, 2019

    Tags: ,

    The statistics are startling:

    • The total burden of student debt in the United States is $1.4 trillion.
    • In 2017 the median millennial wage was $43,000.
    • In the same year, the median millennial debt was $37,000.
    • 59% of employees 22 to 44 have student debt.

    Debt is the #1 financial challenge to all Americans, and by a wide margin. This lack of fiscal health has a negative effect on both mental and physical health, both of which affect employee performance and motivation.

    In a time of reduced unemployment, the battle for talent and its retention is increasing. How do we get quality employees? What can we offer to keep them? If they stay, how can we help maximize appreciation and thus loyalty? The simple answer is to offer a meaningful compensation and benefits package. The more relevant, and complex, answer is to address specific employee needs and thus create a more meaningful employee experience.

    Medical and retirement may be a given, but how valued are those benefits if debt prevents participation or forestalls fulfilling medical needs? Do employees even know the risks of refusal? What will they deny themselves later by not attending to their long term wellbeing?

    Greater attention is thus being paid to employee education in the basics of finance, while offering products, tools, and services under the rubric of “financial wellness.” One of the key components of such a program is instruction in debt management. New offerings in the student loan sector allow employers to go even further.

    Paying off debt is expensive, with the “load” exceeding the interest earned on savings and potentially the tax and accumulation value of a 401k or other retirement instruments Thus, finding a way to alleviate the stress of a financial burden paves the way to take advantage of a significant savings opportunity.

    A burgeoning cottage industry has developed to help those with student loans, primarily through the channel of employer sponsorship. These services offer:

    • Employer payments to employees to reduce loan balances

    (example – PwC gives employees $100 per month for up to 72 months).

    • Access to lenders who will refinance the loan.
    • Education and counseling, not just on existing debt but how to finance a child’s college education (e.g. using 529 plans).

    For a modest fee, these companies expand the resources for employees, streamline services, help reduce debt, and also create a simplified method of repayment through payroll deduction.

    Various studies have cited:

    • 61% of employers polled said they believe student loan worries have hampered retirement plan participation.
    • 81% of millennials, and 65% of those over 50, want their company to offer student loan tools and resources.
    • A similar percentage of both populations would be more inclined to accept employment with a company that offered student loan tools – or stay with a company if they received student loan benefits.

    Granted, specific studies are skewed to favor the sponsoring student loan services, but there is little doubt that student loans place financial, and thus mental and emotional, stress on employees. Just ask them – and then ask how you can help. The more you can offer, the more appreciative they will be. Recognition and appreciation of a benefit’s value is the cornerstone of a successful compensation and benefits program, after all, so now is a good time to see how you can expand yours in a meaningful way.

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