There’s a surprising new audience for benefits that pay off student loans: Older workers with children still in college.
Due to the rising cost of college — where the average person with a four-year undergraduate degree graduates with $70,000 in debt — tuition benefit experts say workers are signing up for tuition payment programs to help pay the student loans of their college-aged children.
Tuition.io CEO Scott Thompson is seeing this first hand. While he does not have any data to illustrate this phenomenon, he says employers are hearing from their employees about this benefit and more employers are asking for a service that allows them to match monthly tuition payments.
“More and more parents of young people are taking on the student loans of their children. Some do it because they want to and some do it because they have to,” he says.
Older workers are finding that their children are reaching the limits of their college loans much more quickly than they did two or three years ago because of the rising cost of higher education. “If your daughter is … in her third year and she can’t borrow anymore to go to school, she has to go to mom and dad to finance her education,” says Thompson.
“And that turns into a parent loan,” he says.
Thompson points out that some of their clients — which include Staples, Fidelity Investments, The City of Memphis, International Paper — have noticed that the older populations of their workforce are now accumulating significant student debt decades after they have graduated from college in the 1980s and 1990s.
“Employers are trying to help that portion of their workforce. It’s almost a universal problem,” says Thompson, whose research says that 25% to 35% of U.S. employees are dealing with a student loan.
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Laurel Taylor, founder and CEO of student debt relief and refinancing firm FutureFuel.io, says that more U.S. employers are seeing their older workers sign up for this benefit.
Employers are realizing that there are essentially three populations within the workforce that have student debt issues: Generation Y, millennials and now Generation Xers, she says.
“The fastest-growing is the parent segment of the workforce and that's a result of either the parents taking out a Parent PLUS loan or because they're co-signers on their children’s loans,” she says.
“The benefit helps them to either directly pay down the debt because the loan that their son or daughter took out didn't cover the full amount or they're a co-signer and they want to be able to essentially point that money toward the loan,” she says.
Clearing debt so employees can save for retirement
Taylor says that she presents data to employers that show as baby boomers retire and millennials become the majority workers in their workforce, as is predicted for 2025, their needs will be different than the older generation of workers.
While some employees on her SaaS platform have as much as $600,00 in debt from 22 different loan administrators, Taylor says these debt-ridden workers “have a mortgage, but they have no home.”
Offering benefits to pay off student loans is more equitable to the workforce, says Taylor, adding that a worker under the age of 35 with a sizeable student loan is most likely not saving up for a home or their retirement.
Taylor says that retirement benefits employers offer are most relevant to employees who are financially well off and have the ability to save for the future, she says. “Financial health and wellness, 401(k)s and many other benefits are unleveraged by those who are not in a position of financial health and wellness, and employers are awakening to the fact that the benefits they give their staff today is actually fairly biased.”
Thompson estimates that 4% to 5% of U.S. employers offer debt matching services to their employees, and adds that he expects this number to grow in 2018. Some employers have plans to offer this benefit either starting July 1, 2018 or Jan. 1, 2019.
“We’re starting to hear that employers are implementing this long-term benefit, thanks to tax cuts,” he says.
