The average student debt of a college-educated Millennial in the U.S. workforce is nearly $30,000.
As a result, these workers are turning to their employers for much-needed financial guidance and assistance in reducing their debt.
Here are six strategies you can share to help your own workers eradicate their student loans — and, in the process, make your organization much more attractive, especially to younger generations of the workforce.
Young employees may be drowning in debt
Millennials are drowning in student debt. According to the Project on Student Debt, the average debt carried by last year’s class of four-year non-profit college graduates was $28,400 — roughly 50 percent higher than it was a decade ago. In fact, outstanding student loans have now risen past the $1 trillion mark, while delinquency on payment rates has nearly doubled, according to global market research firm Mintel.
The sad truth is that Millennials aren’t the only workers saddled with student debt. Plenty of Generation Xers and Baby Boomers continue to struggle to pay off their own student loans or loans they took to fund their children’s education, too
Just as employees look to their employers for guidance on matters such as health care, child care and retirement, they’re now seeking employers’ assistance regarding student loans as well. In response, a growing number of organizations have begun offering employees access to student loan refinancing programs as part of their voluntary benefits packages and total rewards strategies.
Programs such as SoFi enable workers to pay off their student loans faster, often saving borrowers thousands of dollars over the lives of their loans — money that can be used toward living expenses or to fund other employer-sponsored benefits such as 401(k) and retirement savings programs.
6 strategies to tame student debt
In addition to student loan refinancing programs, employees saddled with student debt also appreciate good old-fashioned communication, from their employers. When I meet with employers I often share these six simple but often-overlooked strategies for helping their employees repay student loans more quickly and effectively:
- Get organized — Employees who have multiple loans with multiple servicers often have trouble keeping track of everything. Encourage them to spend an hour loading all of their loan information into a spreadsheet or use online tools such as those provided by tuition.io.
- Set up automatic payments — Setting up an ACH transfer with one’s student loan servicer is a great start, and it minimizes employees’ chances of missing a payment (which hurts their credit scores). Plus, most lenders offer a .25 percent interest rate discount for setting up auto payments.
- Make bi-weekly payments — Paying every other week instead of monthly adds up to an extra month’s worth of payments each year. This can save borrowers a significant amount of money on interest and pay off their loans faster. And speaking of paying off loans faster, paying more than the minimum amount is a great strategy for those who can afford it. Paying an extra $20 (or whatever employees can spare) speeds up the repayment timetable and saves them money on interest.
- Revisit your options, and consider refinancing — Employees interested in reducing the amount of money they’re spending on interest do have options: prepaying, changing repayment plans, and refinancing are three worth considering. Refinancing at a lower rate is usually an option to explore soon after leaving school, increasing one’s income or improving one’s credit. The lower the new rate is, the more borrowers save on interest.
- Figure out federal loans — There’s a common misconception that federal loans can’t be refinanced; in truth, a handful of lenders do just that. While there are things to consider before refinancing federal loans with a private lender, it can be an attractive, cost-saving option for many borrowers with high-interest-rate Direct unsubsidized and PLUS loans.
- Ask for forgiveness — Federal loans might be eligible for forgiveness (these benefits don’t transfer to private lenders through the refinance process). The most common federal loan forgiveness programs are for borrowers in the military, those who work in public service or education, and those who utilize one of the government’s income-driven repayment plans such as Pay As You Earn (PAYE). If there’s a possibility an employee’s loan slate could be wiped clean this way, it’s worth looking into.
Helping can make you an employer of choice
Again, these are six fairly simple but often-overlooked strategies, and they can make a world of difference to your employees’ financial well being.
By giving employees access to a student loan refinancing program and a steady stream of expert communication, you not only help them take control of their financial future but you also become an employer of choice among younger generations of the workforce.
In addition, you’ll reap a powerful set of competitive advantages including higher levels of employee engagement and satisfaction — an enhanced ability to recruit and retain top talent — and a total rewards strategy that sets you apart as a progressive employer of choice.