Special thanks to ADP Marketplace partner, Gift of College, for this article.
It's no secret that a college education is a fundamental requirement for many employees in the workplace. However, the rising cost of higher education is putting employees in a deep financial hole that many simply are unable to escape. With increased competition in the job market, young people have little choice but to take on student debt in order to achieve their future ambitions.
Gift of College has cracked the code on substantially reducing student loan debt by helping with both debt paydown and saving for college.
THE PROBLEM: The problem is $1.6 trillion in student loan debt and according to a recent survey by Gift of College, 75% of respondents say employers should help pay for college and/or pay down student loans and more than 53% think it would be helpful for their employer to provide payroll deduction for 529 college savings plans.
In 2019, only about 8% of employers offered student loan repayment assistance, which is up from 4% in 2018 and 3% in 2015, but still not where it should be. Only 11% of employers offered 529 benefits. Compare that with other critical employee benefits like retirement and health plans--there's a lot of work to be done.
THE SOLUTION: The battle against student loans can be won in the workplace. With 64% of Americans unfamiliar with 529 college savings plans, employers are uniquely positioned to spread the word about how useful these plans can be for preparing for higher education expenses and avoiding student loan debt. Imagine if employees didn't know about health insurance or a 401k? The same treatment should be given to college savings and student loan benefits.
A THREE-PRONG WORKPLACE REVOLUTION
- Recruiting, New Hires and Rewards and Recognition
Chances are your current and future employees are grappling with student debt. How can they save for retirement, consider starting a family, buy their first home, or simply enjoy a debt-free life versus living paycheck-to-paycheck? Without adequate support, employees can become trapped in a vicious cycle of student loan debt - preventing them from achieving other critical financial goals and milestones.
The U.S Department of Education reports that the average student loan debt a graduate in the U.S faces is $35,000 and the typical repayment period for borrowers between $20,000 and $40,000 in federal student loans is 20 years. That's just not ok.
Gift of College enables employers to offer gift cards for rewards and recognition programs, new hires, new babies and other milestones to save for college and pay down student loan debt.
- Welcoming New Babies:
The most critical concern employees are facing is paying off student loans and saving for higher education and as stated above, 64% of families aren't even aware of the 529 tax-advantaged way to save for these expenses.
By increasing awareness and use of 529 college savings plans, employers can help break the intergenerational cycle of student loan debt and give their employees a sense of security while saving for their child's future education costs.
There are many ways you can celebrate the addition of a new child to your employees' families and help employees get off on solid and secure footing for the financial futures of their new arrivals:
- Add tax-advantaged 529 college savings plans to your employer benefits package.
- Offer educational resources around 529 plans: How to open an account and the benefits of saving early and often.
- For employees who are not parents, encourage them to share awareness of 529 college savings plans with loved ones.
- Making contributing easy:
Employees who take advantage of automated forms of savings and payments can control their spending, pay off debts faster and save more for their financial goals. Employers can provide a streamlined approach for employees to save for cost of higher education and pay down their own or a loved one's student loan debt through automated payroll deductions:
- most any 529 college savings,
- 529 ABLE account, or
- toward any student loan account
This includes optional employer match or contribution functionality. Through December 31, 2025, there is a tax advantage for employers to contribute toward student loans just like they get when contributing toward tuition.
Everyone's financial situation is unique to them, and different businesses require different benefits programs.
Wayne Weber, CEO and founder of Gift of College says, "No matter what solution you chose, one thing is clear: the time to act for you employees is now. We've heard such positive feedback from our ADP Marketplace clients that they are thrilled to be able to finally meet the educational benefits needs of their employees."
For more information on student loan or college savings benefits, visit Gift of College At-Work on ADP Marketplace.