Leahannah Taylor graduated from Rutgers University with a master’s degree in biomedical sciences – and $59,000 in student debt – in 2019. She’s now debt-free. It took her less than two years to wipe out her student loan balances, she said, thanks to an enticing incentive offered by her employer.
« My strategy was to attack the debt, » said Taylor, 27, a clinical specialist for the medical devices company Abbott. « I wanted to be in the black as soon as possible. »
She tackled her debt while enrolled in Abbott’s « Freedom 2 Save » program. An employee must use at least 2% of their eligible pay to whittle down student loans. Then, « the company kicks in a 5% contribution to the employee’s 401(k) account, without them having to contribute a dime, » according to Abbott’s website.
« I understand the importance of compound interest, » said Taylor. « So contributing to retirement sooner rather than later was very important to me. »
Abbott’s program, which started in 2018, has attracted 1,800 employee participants. It increased in popularity during the pandemic, with a 50% rise in the monthly average number of employee sign-ups in the past two years, according to Mary Moreland, Abbott’s executive vice president of human resources.
That assumes the employee makes regular minimum payments on the loan with a 4% rate and 10-year term
« I think people were looking for ways to control what they could control and one of those things is paying down their debts while saving for retirement, » Moreland said.
Nearly half of employers – 48 % – currently have or plan to offer student loan debt assistance as a benefit, according to an October survey by the Employee Benefit Research Institute. That’s up from 32% in 2018.
« This talent war has really brought on the need to think outside of the box and what type of benefits could be offered that would benefit them financially, » said Jill Buban, vice president of Bright Horizons EdAssist Solutions.
While programs like Abbott’s, where 401(k) plan contributions are tied to employees’ student loan debt payments, are the most widely offered employer benefit for student debt assistance, according to the EBRI survey, it’s not the only option available. In the next year or two, a greater share of employers plan to offer student loan debt payment counseling or pay loan repayment subsidies, similar to tuition reimbursement.
Fidelity, Google and New York Life are some of the companies that will make direct payments toward an employee’s student debt.
Aliah Gibson, 32, is a human resources specialist at New York Life. She is taking advantage of the company’s benefit contributing $170 a month toward her student loans.
The burden of student loan debt can be eased by employer programs, Taylor said
Thanks to the program, as well as her own payments, she’s now paid off nearly a quarter of her debt.
« When I talk to peers, I tell them what New York Life is doing, » Gibson said. « They’re like, ‘Oh, my goodness, I wish my company did that, or they’d offer something like that. That’s amazing.' »
Take an employee with a $26,500 student loan balance. A $100 a month repayment benefit would help the borrower pay off that debt about three years earlier and save more than $10,000 in principal and interest over 10 years, according to EBRI.
Gibson, a new mom, said the student debt assistance benefit has helped shore up her family’s financial security. She and her husband Quincy now have the ability to also save for their 6-month-old son Quinn’s college savings account.
The key is knowing what benefits are out there, understanding the offerings and taking advantage of the perk, she clickcashadvance.com personal loans with bad credit said.
« Financial success is a marathon, not a sprint, » Taylor said. « I found great encouragement from looking at those who are in my same position and having success. »