Benefits

Many Employees Would Choose Student Loan Assistance Over 401(k)

It is feasible, budget-wise, for participants to participate both in a student loan repayment assistance program and a defined contribution (DC) plan, says Balaji “Raj” Rajan, CEO of IonTuition.

By Rebecca Moore editors@plansponsor.com | July 18, 2017
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As the stress of looming student debt grows, more employees are looking to work for companies that offer to pay down their student loans, according to a survey by student loan management assistance provider IonTuition.

The survey found 80% of respondents would like to work for a company that offers student loan repayment benefits compared to 70% who said so in a 2015 survey.

More than half of those with student debt would prefer monthly contributions towards their loan debt rather than health care benefits, and nearly 48% would choose student loan assistance over a 401(k). Of the nearly 50% of respondents who reported having a 401(k), nearly one-quarter said they would prefer student loan assistance over their 401(k) plan.

CEO of YouDecide Peter Marcia, based in Richmond, Virginia, foresees an increase in student loan programs being ever-more present and offered by employers as more and more young talent is being hired. Repayment programs are going to be utilized as a powerful incentive for the recruitment and retention of young employees within companies, especially as graduation has just recently occurred and many Millennials are looking for financial assistant to pay off student debt, he says.

Asked if employees should focus on paying down debt first before saving in a retirement plan, Balaji “Raj” Rajan, CEO of IonTuition in the greater Chicago area, says, “Debt is expensive and hurts the ability to save. The question is that of balance, the type of career and earning prospects, and lifestyle. For those who have a high earning prospect as they grow older, paying down debt is best. For those who believe they are going to be on a fixed, stable income as they grow older, balance is needed. Retirement is important, but most people don’t think about retirement savings till they are closer to 40. And a large percentage of our population today carries student loan debt well into their forties.” 

NEXT: Is it feasible to pay off student loans and save for retirement?

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