Getting employees to save more for retirement can start with plan design relying on auto-features but it’s just a start. Understanding the issues of different groups of employees by engaging them in holistic financial wellness is essential especially for Millennials burdened by student loan debt. The PSCA Plan Sponsor Council of America) recently conducted a survey with members about the impact of student loans on retirement savings.
First the facts:
Student loan borrowing has tripled from 1990-91 to 2012-13.
69% of people graduated with student loan debt in 2011-12 compared to 49% 20 years earlier
The 2015 class had an average of $35,000 in student loan debt.
After taxes and loan repayment, the average graduate earning $48,177 had just $2700/month left over.
25% of loans are delinquent.
While 70% of companies surveyed by the PSCA have tuition reimbursement programs, only 1.4% have student loan repayment service though more companies are receiving requests for help driven by existing employees.
Overall, 35% of plan sponsors thought that student loans are a barrier to people saving for retirement with the service industry at 42.5% and technology/telecom at 45.5%.
Employers sponsoring a defined contribution (DC) plan can help their workers with student loans by matching loan payments through contribution to the company’s retirement plan whether the employee is contributing or not. Tuitio.io offers companies the option to facilitate and pay off student loans by offering $100-$200 per month as a way to attract new employees saddled with student loans.
Prudential, partnering with a startup, Student Loan Genius, offers a similar solution.
Critics say that the industry should focus more on refinancing student debt rather than just helping workers pay it off.
With a tightening labor pool, especially in these industries, helping employees with student loans can be a powerful recruiting and retention tool and a way to get people to save more for retirement.
