College is known for creating hangovers, but few are more painful than the financial ones caused by student loan debt that can last for decades.
It’s no wonder millennials get late starts in contributing to 401k plans when they’re saddled by student loan debt. Meanwhile, boomer and Gen X parents are sabotaging their own retirement accounts by borrowing to help their kids pay for college.
Could a 401k-like plan where employers offer a match for student loan repayments be part of the solution?
An overwhelming 92 percent of people surveyed in a new study from Guardian say they would take advantage of such a program if it was offered, and 79 percent of millennials would like their employer to offer a student loan repayment plan.
Currently, less than 10 percent of all workers have access to college savings or debt-related benefits plans through their employer (i.e. tuition assistance, 529 plans, loan repayment).
The problem of how student loan debt is impacting workforce wellbeing, absenteeism, and productivity – not to mention hamstringing retirement planning – is at the heart of a new report from Guardian, “College Debt in America: The Case for Tuition & Loan Repayment Benefits.”
As the nation’s student loan bill soars to more than $1.5 trillion, the report details how many working Americans are grappling with the consequences.
Seven in 10 working adults with college debt rate their finances as the major source of their stress compared to four in 10 of those with no college debt, according to initial findings from Guardian’s sixth annual Workplace Benefits Study, released Feb. 4.
Compounding this stress is that fewer working Americans feel they are making good progress toward paying off their college debt or saving for their children’s college education compared to two years ago.
Consequently, 7 in 10 parents plan to use some retirement savings and investments (stocks/bonds) to pay for their children’s college education, putting their own financial wellness at risk.
“A majority of Americans rely on the workplace for financial security and addressing college debt is one area of focus that is gaining momentum as a viable workplace benefit,” said Marc Costantini, Executive Vice President, Commercial and Government Markets, Guardian. “There is a growing interest among employers to differentiate themselves to attract and retain younger talent, and this workplace benefit can help make a positive difference in improving financial wellness among employees.”
Boomer college debt grows
While much of the attention has focused on millennials who carry the majority of the debt, there is a growing trend of baby boomer parents who have over-extended themselves financially to help fund their children’s college education.
More than 50 percent of boomers say college debt is negatively impacting their ability to meet their financial goals, such as maintaining their lifestyle in retirement, according to Guardian’s data.
Recent data from the Department of Education confirms that at the end of September 2018, 1.8 million borrowers age 62 and older owed $62.5 billion in federal student loan debt and those in the 50-61 age group owe $213.6 billion.
New wave of college education benefits
With college debt at the forefront of today’s national conversation, more employers are taking notice and examining the impact that this financial obligation is having on employee engagement and productivity.
For example, 7 in 10 employers say improving their workers’ financial wellness is a top benefits objective – up 15 percent since 2015. A diverse number of benefits are on the rise to help employees either pay down college debt or help save, such as student loan repayment plans, college tuition rewards, debt management resources, and access to financial advisors.
Several pending Congressional bills could extend Section 127 (Education Assistance Programs) and accelerate this workplace trend.
To download Guardian’s “College Debt in America” paper, click here.