The Next Big Thing in Workplace Financial Education: Help with Student Debt
By Dan Kadlec
November 6, 2016
This is an updated version of a post that previously ran on Time.com
Just 4% of employers assist workers in paying down college debt. But this is the next big thing in company benefits, and every human resources department should take a look.
To retain workers, large companies have been adding financial wellness and financial education programs at a rapid clip. They might think of student-debt pay-down programs in the same way because 76% of workers with such debt say the benefit would be a major factor in considering taking a job.
Next month, the American Bankers Association will begin helping employees with their college-related debts. The ABA will pay up to $1,200 per year per eligible employee toward their student loans, above and beyond salary and any other benefits. The organization, which represents banks that employ more than 2 million people, said it is encouraging each member bank to take a similar step.
In doing so, the ABA joins trend setting companies like financial powerhouse Fidelity Investments and the global business-consulting firm PwC. Fidelity offers the Step Ahead Student Loan Assistance program, which contributes $2,000 annually for up to five years. PwC offers the Student Loan Paydown program, which offers $100 a month for up to six years.
Research shows that student debt is a drag on the economy as graduates delay the purchase of cars and homes, even weddings. On the campaign trail, Democrats and Republicans have both said they intend to take steps to help young people get out from under their debt cloud. Millennials are accumulating massive liabilities, a new report shows. Some 70% have at least one source of long-term debt and 34% have two, according to the National Endowment for Financial Education.
To make ends meet, a quarter of Millennials have raided their retirement savings and another quarter are overdrawn on their checking account. A similar percentage is under water on their home, late with mortgage payments and have unpaid medical bills. Half of those with student debt say they will never be able to repay it. Many Millennials also owe credit card late fees and pay only the minimum monthly amount due, NEFE found.
Young employees increasingly understand the financial hurdles in front of them and are insisting on financial guidance as well as direct assistance, like loan payback. For employers, this is the next battleground to attract and keep the best workers.