You’ve probably heard about America’s $1.5 trillion student debt problem. It’s no secret the strain of student loan obligations has led some to put off buying homes, starting families and pursuing their dreams.
If a recent Price-Waterhouse financial wellness survey is any indication, it’s also probably getting in the way of productivity at the workplace.
Half of the millennial workforce holds student debt. Generation X and Baby Boomers hold their share, too, some having gone back to school and others paying back loans they took out for their children.
Many are feeling the pressure, which makes it increasingly hard to check the worries at the office door.
Student loan repayment perks
Some workplaces are responding by offering a student loan repayment perk. More have incorporated this benefit in the last year, in hopes of attracting Millennial and Gen Z talent. There is a more proactive approach companies can take, however, and it’s one that gets to the root of the problem.
Employers can help their employees prevent massive student debt in the first place by equipping them to save. Forty-nine percent of employees are planning to save for a child’s or grandchild’s education. But saving for college is harder than expected for 79% of parents, according to a recent Student Loan Hero survey.
Businesses can make it easier by including a 529 benefit.
A 529 plan is a higher education savings tool that can help families of various means prevent or minimize future student debt. With tax-free investment growth and state tax incentives offered by many states, 529s offer what traditional investment accounts do not – plus the benefit of compound interest.
It’s a tool that can work well whether an employee has a modest or robust salary. In fact, just contributing $10 a week to a 529 can add up over time – more than $15,000 in 18 years or $6,700 in 10 years.
Looking at the results of a recent California study conducted by ScholarShare 529, this is something employees want. Eighty-three percent would like to know more about a workplace college savings program. Seventy-nine percent say a workplace college savings program “shows the firm cares about its employees.”
Incorporating 529s in the workplace can mean anything from allowing employees a direct deposit option to offering an employer contribution perk. Even just making employees aware that the plans exist can go a long way in minimizing financial stress.
I know, because that’s what we’ve been equipping employers to do in Virginia. We are finding that employers understand the importance of helping employees save for important life events and are looking for opportunities to offer value and add benefits that don’t require additional budget.
No extra costs or complications
That’s the beauty of this approach. It doesn’t have to cost extra or be complicated to administer to be of value to an employee. Just by allowing an employee to learn about college savings plans while at work has extreme value.
So, does an employer 529 plan sound like something worth exploring? Here’s how employers can add this benefit:
- Find the right plan. The state where your employees reside is the best place to start. You aren’t restricted to offering a plan within state lines, but many states have tax incentives for residents.
- Reach out to the 529 employer program contact. Many 529 websites have a page that is dedicated to employers. Learn about the specifics of the programs they offer. Be sure to ask how they can help educate employees and also inquire about their direct deposit process.
- Weigh the options and decide. Is the primary goal awareness? Would a direct deposit option help your workers save? Do you have the ability to offer a contribution?
- Let your employees (and potential employees) know. Offer a financial wellness session, host a webinar, include a segment in your newsletter or pass out pamphlets at a staff meeting. Do what you need to do to let workers know. Don’t be shy about talking it up on LinkedIn either. When you make it known that your company cares about financial wellness, it will be another reason for talented people to consider a future with you.
In a world where jobs outpace those who can fill them, employer 529 plan offerings can up your benefits game and help them stand out from the rest. It’s good for business. It’s good for the people who power the business.
Most importantly, it’s good for society. Less student debt could make a world of difference for the next generation –and for the parents, grandparents and degree seekers who keep your company running.