Helping Workers Struggling With Student Loan Debt

With education and new tools, plan sponsors can help employees get student loan debt under control.

While a pestering task, paying off student loans requires fulfillment and consistency, says Matt Sommers, vice president and retirement strategy group leader at Janus Henderson.


A survey from IonTuition found 57.8% of employees said it would be helpful if employers provided information and online tools, including a hotline for repayment education and one-on-one student loan counseling. Additionally, 35.6% of respondents are unaware of their student loan repayment options.


Providing access to an adviser who can offer tailored solutions—including refinance, auto-debit programs and alternative restructuring—can provide employees with relief from overwhelming payments or disband uncoordinated payment planning, according to Sommers.


He says advisers can recommend employees with multiple loans consolidate or refinance into one loan with a private lender, in an effort to reduce their interest rate.


Similarly, an alternative payment plan may suit individuals who are drowning in a large monthly payment. Rather than failing to recompense, advisers can mention restructuring the loan and tying a specific percentage to the worker’s income, about 10% to 15%. Whereas the downside requires spending more interest over time due to smaller payments, Sommers notes it’s the manageability that turns this into a benefit.


In addition, for a way to check off their payments on time, Sommers says employees can use auto-debit.


Repayment Tools


A new program at Fidelity allows workers to gain counseling and education about federal repayment plans and private refinancing, while employers may choose to make payments on employees’ loans—a solution that can provide great relief to those delayed in their retirement savings.


“The whole goal is to help people think through what loans they have, understanding those loans across different interest rates, providers, etcetera, and then also empower them with information on what are the choices they have in front of them,” says Akhil Nigam, managing director of Fidelity. “It’s not generic information, it works with your numbers and your personal situation.”


With Fidelity’s Employer Contribution program, employers can pay down their employees’ student loans, through the utilization of a new recordkeeping service, similar to those for 401(k) and 403(b) plans.


“Employers can say who’s eligible for their program and how much they get, and we’ll administer the backend—all the payments, routing, operations, down to the loan services on behalf of their employees,” Nigam says.


Similarly, IonTuition offers a program with which employees can have a clearer picture of their student loans, federal and private, all in one place, along with access to repayment planning tools that simplify complex repayment options and make it easy to work out which repayment plan best suits each user’s unique situation. Additionally, IonTuition has a team of expert student loan counselors standing by to assist with any questions employees might have, and the program allows employers to accelerate employees’ student loan payments by making contributions.


Jovan Hackley, director of marketing and PR at Student Loan Genius, also a provider of student loan repayment benefits, says data shows $100 in matching can help save up to $74,708 off employees’ student loan repayment, and $100 in matching can help cut repayment time by up to 10 years and 10 months in the most extreme cases.


Scott Francis, CEO of BP-3, which offers Student Loan Genius to its employees, says, “It reflects to employees how valuable they are to us; we want to help them pay down debts that may be holding them back from investing in future. My suspicion is, this will become a more used benefit in the future because the student loan debt problem will be a bigger and bigger concern with each generation.”