Employer Student Debt Help Not Reaching All Who Need It

A Fidelity analysis found Baby Boomers and Generation X have high student loan debt, but as it may be for their children’s education, many employer programs are not helping.

New data derived from Fidelity Investments’ Student Debt Tool shows, although the majority of users of the tool who reported their debt are Millennials, users who are Baby Boomers or Generation X actually carry a higher average student debt loan burden.

Among the 1,599 Baby Boomers, the average loan balance is $56,652 and the average monthly payment is $565; among the 6,996 Generation X users, they are $55,870 and $490, respectively. For the 21,034 Millennial users, the average loan balance is $45,548, and the average monthly payment is $469.

Asha Srikantiah, head of the Fidelity’s Student Debt program, based in Boston, says it is eye-catching to see older generations have higher student loan debt, and that Fidelity’s analysis is backed up by other sources, such as the Federal Reserve Bank.

She says the loan type that is fastest growing is the Parent PLUS loan, and the fact that tuition for higher education institutions keeps rising could be why Generation X and Baby Boomers have higher outstanding student debt. Both Baby Boomers and Generation X could have a combination of their own student loans and loans for their children’s education.

The Parent PLUS Loan is a federal direct student loan available to the parents of dependent undergraduate students. These loans do not enjoy certain government programs to reduce student loan debt. Srikantiah explains that Parent PLUS loans can be refinanced, per the lender’s terms of refinancing, but Federal student loan forgiveness programs and most government repayment programs are not available for loans to parents, only for direct federal loans.

As for employer help with student debt, Srikantiah says some employers believe Parent PLUS loans should be made eligible for student debt direct contribution benefits, but some say these benefits are only good for those paying down debt for their own education. “To date, more employers are only offering help for employees with loans for their own education,” she notes.

But as employers see the statistics, Srikantiah believes they will start thinking about changing their benefit parameters. “What we might see is, as more broad types of benefits designs grow, employers may choose to include Parent PLUS loans because solutions may not create the same type of budgeting burden on employers while enabling more employees to cater benefits to their best interest,” she says.

For example, Unum is enabling employees to choose to have a monetary contribution of some of their PTO days paid toward student debt, and Unum says Parent PLUS loans are eligible. Montefiore St. Luke’s Cornwall offers the same thing.

One thing Fidelity is excited about and working on is pre-college guidance. “We are looking to better equip families of high school students with tools and education to plan for and manage the costs of a child’s education, Srikantiah says.

“We are seeing a lot of employers recognizing that employees may not have student loan debt yet, but they may have it in the future as their children approach college age,” she adds.