Guardian Foresees Student Loan Repayment Programs Taking Off

Fifty-two percent of late Boomers say college debt is a major impediment to meeting their financial goals, while 38% of early Millennials and 32% of later Millennials say the same.

Noting that the cost of college in the U.S. has increased nearly 400% since 1990 and that 44 million Americans, or 29% of the working population, is carrying student loan debt totaling $1.5 trillion, Guardian says that “savvy employers are introducing benefits such as tuition assistance programs, college savings plans and student loan repayment plans.”

These are some of the key findings in Guardian’s new report, “College Debt in America: The Case for Tuition & Loan Repayment Benefits.” Only 33% of those with college debt say their personal financial health is excellent or very good. However, among those without college debt, this jumps to 49%. Among those without college debt, 43% rate money and personal finances as the top sources of stress in their lives. However, among those with college debt, this jumps significantly to 70%.

Guardian also discovered that fewer workers are making progress toward paying off their college debt or saving for their children’s college education than two years ago. Thirty-one percent less say they are making good progress toward paying off college debt, and 27% less say they are making headway toward saving for their children’s college education. Additionally, 24% less say they can replace income if ill or injured, and 20% less say they are on the right track toward saving for retirement.

Women are also more likely to have student debt. They represent 56% of university students nationwide but hold nearly two-thirds of all college debt. College grads’ average outstanding student loan is $37,000. Among households, this rises to $50,000, including loans for their spouse or partner, as well as their children.

Forty-five percent of working adults say paying off college loans is a very important financial goal, up from 35% in 2016. Younger people are more concerned about paying off college loans, with 57% of Millennials saying this is very important, but only 41% of Gen Xers and 15% of Baby Boomers saying so.

College debt affects retirement savings, retirement security

This is probably due to the fact that three-fourths of Millennial college graduates are carrying student loan debt, either for themselves or their spouse/partner. Guardian says this is affecting home ownership among younger people, with only 35% of households headed by someone younger than 35 owning a home in 2017, down from 41% in 1982.

Thirty-six percent of Millennials say that debt has caused them to put off buying a home. Thirty-percent say it is delaying their retirement savings, and 16% say it is delaying their decision to have children. Twenty-five percent of Millennials have no personal savings, and 66% say they would have difficulty paying an unexpected bill of $1,000.

Eighty percent of those between the ages of 22 and 35 who have not bought a house blame their college loans. But Baby Boomers are also being saddled with college loan debt, primarily due to paying for their children’s college education.

Fifty-two percent of late Boomers (age 54 to 60) say that college debt is a major impediment to meeting their financial goals. Thirty percent of Gen Xers, 38% of early Millennials (age 30 to 37) and 32% of later Millennials (age 23 to 29) say the same.

Guardian’s report notes that “Baby Boomer parents, in trying to fulfill their children’s dreams of a college education, have too often tapped their retirement savings, drained emergency funds and stretched the limits of their own financial resources. Many of these sexagenarians are unable to retire when planned, and those who are retired often struggle to maintain their standard of living or afford adequate health insurance.”

Seventy percent of parents plan to use at least some retirement savings and investments to pay for their children’s college education.  Fifty-two percent of working Americans in 2018 said that saving for their children’s college education is highly important, up from 45% in 2016.

Employees want help with college costs

Today, less than 10% of workers have access to college savings or debt-related benefits plans through their employer. However, among those without access to any of these services, 51% are interested in tuition assistance, 49% are interested in a 529 college savings plan, and 47% are interested in loan repayment programs.

Guardian’s report notes that “unfavorable tax treatment of student loan repayment plans has been an obstacle to employer adoption. Today, companies receive no tax incentive for such contributions, while employees must report payments as income to the IRS. More favorable tax treatment of such plans will certainly enhance their appeal, as it did for 401(k) plans in the 1980s. Student loan repayment plans could easily become one of the hottest employee benefits of the next decade.”

Guardian says that employers can help workers pay down college debt through student loan repayment plans and debt management resources. Additionally, they can help with continuing education through tuition reimbursement and professional development, and with saving for a child’s education through 529 plans.

Zeldis Research conducted two online surveys among 1,700 employers and 1,800 workers for Guardian’s Sixth Annual Workplace Benefits Study. The “College Debt in America: The Case for Tuition & Loan Repayment Benefits” can be downloaded here.