The cost of higher education has skyrocketed to
Despite efforts to get ahead of these costs, a
At the same time, working parents are faced with a difficult dilemma: choosing between saving for retirement or funding their children's college education. Our same
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There are a number of different benefits options available for employers to support employees with their education-savings goals. One way to do this is by educating employers on the importance of offering education expense-focused benefits, such as a
Funds can be used for a variety of qualified education expenses, including college tuition and fees, books and supplies, some room and board and (in many states) even K–12 tuition up to $10,000 a year. By providing a simple, tax-advantaged way for parents to begin stowing away funds for their children at an early age, they can lessen the chance that they'll be forced to dip into their own retirement or investment accounts later in life to front massive bills for education expenses.
There have been promising developments on the legislative front to help expand the options that people have for their 529 funds. The recently-passed SECURE Act 2.0 now enables investors to roll over unused 529 funds into a Roth IRA, ensuring no money set aside for college is left on the table and increasing the flexibility that savers have over how to deploy these funds. Employers can further encourage participation by offering matching contributions or automatic payroll deductions to their 529 plans.
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Employers also should consider benefits like educational-assistance programs, tuition reimbursement, scholarships, access to financial advisers, or student loan management solutions to alleviate the financial strain often felt post-college.
We've observed that offering student loan management solutions has grown significantly in popularity over the past few years. It's a benefit that we know employees are increasingly craving, with more than half (51%) of the employees we surveyed believing that employers should play a role in helping people pay off student loan debt. By offering these benefits, employers show they genuinely care about their employees' financial well-being, while also helping to lighten the long-term financial load that comes with higher education.
SECURE Act 2.0 also provides new opportunities for employers to bring their student loan management solution closer to their 401(k). Beginning on January 1, 2024, employers can elect to offer an employer match into their 401(k) for qualified loan repayments. That means employees who are repaying their loans but unable to make employee contributions into their 401(k) accounts still would be eligible to receive a match.
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A one-size-fits-all approach no longer suffices in serving today's diverse workforce. Customized benefit offerings, including retirement plans, healthcare options and education-focused benefits, are essential to address the unique needs of different demographics. This is particularly true for groups that may be disproportionately affected by the cost of higher education or the pay gap.
In the face of this mounting financial burden on working parents and recent graduates, advisers can play a crucial role in guiding employers toward the types of education-focused benefits that will help them best support all employees in their financial journeys. By offering solutions to manage the costs of college (from saving to paying off debt), employers can empower their employees to pursue education without compromising their own financial security.
