Millennials want student loan benefits over 401(k)s. Here's why that's a problem

Younger employees think student loan benefits and forgiveness may be their best bet for achieving financial security. But industry experts contend they may not want to forget about other financial benefit options.

According to new research from the American Institute of CPAs, which asked 2,000 millennials which benefits would help them achieve financial goals, health insurance (cited by 54% of respondents), paid time off (45%) and student loan forgiveness (41%) topped the list of most desired employee benefits. Although student loan help was behind the two traditional benefits, experts say it shows the rising need for student debt assistance in the workplace.

Indeed, nearly two-thirds of young adult job seekers have student loan debt — with an average balance of $33,332, according to data from the American Institute of CPAs.

The national student loan balance now sits at over $1.5 trillion, according to the Federal Reserve, and is capturing the attention of legislators and presidential hopefuls including Senator Elizabeth Warren who has made eliminating student loan debt a key part of her campaign.

Though employees and employers alike see value in student loan debt benefits, industry experts warn that focusing on paying off debts shouldn’t replace retirement planning. A 401(k) match was the fifth most popular benefit cited by millennials in the survey (at 36%).

“If you only focus on student loans, then you’ve lost 10 years of retirement planning,” says Tracie Miller-Nobles, a CPA and accounting professor at Austin Community College, explaining that employers should encourage workers to not put off saving for their post-work years.

“The more [financial] education employers can provide young adults with more options, I think that will really connect with those young adults.”

Some employers have already taken note and are encouraging workers to save for retirement while simultaneously paying down debt. For example, CSAA Insurance Services now allows employees to use 4% of their employer-matched retirement benefit to pay down their student debt. Travelers Insurance also added a similar benefit.

But even if an employer has student loan repayment benefit, workers still may need more education on how to save for both retirement and pay down their debt.

One option employers can explore is having a financial adviser or a CPA on staff or making regular visits to the workplace in order to educate and guide younger workers on their overall financial well-being. Having a kind of expert-led financial wellness program can help young workers identify their goals and understand that paying off a student loan in 10 years can be a detriment long term, Miller-Nobles says.

See also: What’s next for student loan benefits?

It can be daunting for young people to come out of school and be excited about the next chapter of their lives when they have to pay down an insurmountable amount of debt, says Nicole Horton, a financial planner with Wells Fargo Advisors.

One of the employees Horton worked with was a young woman who discussed her desire to purchase a car. The employee was also paying student loan debt and needed to contribute to her 401(k) plan, Horton explains. The employee wanted to know which she should prioritize, and it ultimately came down to helping that employee discover what would be more important to her 10 years down the line. In all likelihood that car wouldn’t be in the picture in a decade, but the 10 years between ages 22 and 32 can result in a higher retirement savings balance, she explains.

“We can’t save for retirement in the backend,” Horton says. “We have to save for it in the frontend.”

Although employees may want student loan benefits, employers aren’t entirely sold. While many industry insiders point to the growing appeal of student loan benefits, just 4% of employers currently offer a student debt repayment program, according to the Society for Human Resource Management. Many are still debating whether the popular benefit is right for them or too much of a financial burden. But there are benefits for employers to increasing access to financial education and student loan repayment offerings, experts say.

See also: Employees want student loan benefits — but employers aren’t sold yet

“The employer can get tax breaks,” Horton says. “On top of that there is employee retention. Employers are looking for top talent and in order to secure top talent they have to become creative.”

In order to keep younger employees from jumping ship, employers should show workers that they are willing to invest in them personally. Employers can also offer, employee sponsored 529 plans, which are a way to help workers stave off future college costs for their children. Though 529 plans are actually sponsored by the state, employers can add it as an access piece to the 401(k) porton, Horton says.

While there has been an uptick in employers providing workers with programs that offer greater financial literacy in different aspects of their lives, there is still more to be done, says Nick Hendricks, a consultant with The Benefits Company.

“I think we’re going to see the IRS going back to companies and saying they can match some of those dollars for the 401(k) or for the student loans,” Hendricks says. “I think that by itself, you’re going to see more of it happening but you’re also going to see this combination of benefits. Instead of thinking about as here’s your student loan program over here and here is your retirement plan, there’s a combination of both.”