Early planning can be a form of student loan debt relief that improves retirement savings. It’s a win-win situation! Student loan debt relief is done in a number of ways. Research has found that workers with student loan debt are saving significantly less for retirement than they should. A working paper from the Center for Retirement Research at Boston College specifically points to this topic. It shows that undergraduate students with student loans by the age of 30 have significantly fewer retirement assets. This compares to colleagues with no college debt. As a result, paying a student loan each month lowers the pension contribution rates.
Today’s 43.2 million student loan borrowers have an average debt of $ 39,351 each, according to Educationdata.org. All is not lost, however. With early planning and ingenuity, junior professionals can manage their student loan debt relief. Better still, students can avoid debt altogether. It’s important to note that planning needs to start early – ideally if the people are still high school students. It can be worthwhile – in households without student loans, the retirement savings almost double. According to a recent study of student loan debt by the Employee Benefit Research Institute (EBRI), the average retirement plan balance was $ 46,768 for families with college heads under 35, compared with $ 25,581 for families with student loan debt.
How can students plan early to avoid or reduce student loan debt? James Lewis, co-founder of the National Society of High School Scholars (NSHHS), has a proposal. The students – and their parents – need to equip themselves with knowledge and a game plan. Here are some tips he recommends to get started:
- Take advanced placement (AP) classes in high school. High AP test scores not only help with college acceptance but also help with college pay. Such credits can be paid for half a year or even a full year of study. Students should first find out which colleges will accept AP credits and when to start class. Another way, double enrolling in college while the student is still in high school can help defer the cost.
- Look at the military or ROTC. Students can earn tuition fees through military service and work / study programs. The Army is one of the largest scholarship recipients in America. In 2019, the Army awarded $ 3.2 million scholarships to NSHSS members.
- Look for generally available scholarships. There are a large number of scholarships available – in most cases more than students (or parents) realize. According to Rachel Cruze, Dave Ramsey’s daughter, the best-selling author and personal finance guru, offers a different strategy. “Future college students should do part-time jobs, apply for scholarships, and stay away from the student loan trap!”
Obviously, it is too late for today’s early talent to plan options ahead of time. You need to find student loan debt relief in other forms. In this case, employers can help by offering services such as student loan repayment support programs. As the name suggests, there are student loan debt relief programs. These repayment assistance programs are benefits where an employer can help workers pay off some of their student loan debt. Staff welcome the help. In fact, nearly half (45%) would prefer student loan payment contributions over retirement plans, such as 401 (k) s and 403 (b) s. For younger employees, this figure is even higher at 54%. Additionally, regulations enacted during the Covid-19 pandemic allow companies to use pre-tax dollars to repay employers up to $ 5,250 by 2025.
Financial wellness programs are another benefit employers can use to help workers with student loan debt relief. Financial wellbeing helps workers prioritize paying off debts and saving for the future. Recent studies have shown that offering financial wellness programs in the workplace can be helpful in other ways. They can help improve the physical and mental health of employees and make them happier and more productive. Everyone benefits.
Steff C. Chalk is the Executive Director of Retirement Advisor University, a partnership with the UCLA Anderson School of Management Executive Education. Steff also serves as the Executive Director of Plan Sponsor University and is currently the Faculty of Retirement Adviser University.