Billionaires Paying Off Student Loans Isn’t a Solution to Debt Problem

Employers get creative to help with debt burden affecting all generations

Stephen Miller, CEBS By Stephen Miller, CEBS May 22, 2019
Billionaires Paying Off Student Loans Isn’t a Solution to Debt Problem

​Class of 2019 graduates at Atlanta's Morehouse College couldn't believe their luck when their commencement speaker announced he would be paying off the entire student debt of the historically black college's 400-member class. Billionaire Robert F. Smith, CEO of Vista Equity Partners, is donating a grant estimated to be worth around $40 million, the Atlanta Journal-Constitution reported.

Morehouse President David Thomas told CBS News, "This will allow them to pursue their dreams ... as opposed to serving the debt."

Having a billionaire pay off your student loans, however, is about as likely as winning the lottery. Instead, graduating seniors will be looking to their future employers for help with their student loans, and so will older workers who have outstanding loans or who have co-signed loans for their children.

SHRM Online has selected the following content to provide a deeper look at student loan debt benefits.

Student Loan Burden Affects All Generations

Federal Reserve data show that Americans owed $1.5 trillion in student loan debt and that people aged 50 or older owed 20 percent of that total, or $289.5 billion, a more than five-fold increase from 2004. The percentage of student-debt holders aged 50 or older who were in default on their loans is much higher than for younger borrowers.

While more older workers are helping to finance college education for their children, grandchildren and other relatives, most older borrowers hold loans taken out for their own education, sometimes decades earlier.

"It is stunning that more families are taking on such sharply greater amounts of student debt than in the past," said Lori Trawinski, director of banking and finance at the AARP Public Policy Institute. "For younger families, this burden impedes their ability to save for other purposes, such as for a home, their children's education or for their own retirement.  For older families, long-term financial security can be threatened by this burden."

Millennials Put Student Loan Forgiveness Near the Top of Desired Benefits

When those who graduated from college in the last 24 months or who will graduate in the next 12 months were asked to choose the top three benefits that would most help them achieve their financial goals, their top two choices were health insurance and paid time off—but student loan forgiveness was the third-most cited option, according to a September 2018 poll with 547 respondents, sponsored by the American Institute of Certified Public Accountants (AICPA).

Young Adult Job Seekers' Top Benefit Choices for Meeting Financial Goals
Benefit Chosen in Top 3 by:
Health insurance54%
Paid time off
Student loan forgiveness41%
Working remotely38%
401(k) fund match36%
Tuition reimbursement25%

Source: AICPA.

Tellingly, among those with outstanding loan debt, student loan repayment was viewed as being a more important use of their benefit dollars. When asked whether their employer should contribute a hypothetical $100 either to pay a portion of their student loan debt or to put toward a specific benefit, young job seekers burdened by student loan debt said they would prefer their employer helped pay off their student loan debt.

"Student loan debt can cause recent graduates to make the mistake of looking past the benefits an employer is offering and just focus on the salary," said Gregory Anton, CPA, chairman of the AICPA's national CPA financial literacy commission.

Women Carry More Student Debt than Men

Women hold almost $890 billion of student debt, while men hold $490 billion, according to a report by the American Association of University Women (AAUW), which also found that black women graduates hold the most debt, averaging around $30,400, compared to about $22,000 for white women and $19,500 for white men.

Women took on more debt to finance their degrees because they were coming from poorer, less-educated families than their male counterparts, according to data compiled last year by the Chronicle of Higher Education. Women students with large debts also tended to be older, independent of their parents and more likely to be parents themselves or managing dependents.
(Forbes and AAUW)

Student Loan Benefit Considerations

Before recommending any new program, HR professionals first need to understand what their competitors are offering as perks and benefits. Also, before committing to a reimbursement program, survey your workforce to determine its needs.

Be creative when designing programs, but be sure to understand their impact on the business. Once you decide that a student loan reimbursement program is the right choice for your organization, generate interest and excitement. Engage the entire workforce—don't  offer it only to new hires.
(SHRM Online)

[SHRM members-only toolkit: Designing and Managing Educational Assistance Programs]

Integrating Loan Aid with Other Benefits

Employers continue to roll out new ways to provide workers with student debt relief. Insurance firm Unum, for instance, announced in January that it will let employees exchange accrued but unused paid time off (PTO) for payments against their student loans. Participants in the student debt relief program can transfer up to 40 hours of carryover PTO into a payment against student debt.

Last year, Abbott Laboratories launched a program to aid employees who contribute at least 2 percent of their eligible pay to their student loans through payroll deduction. These employees can receive an amount equivalent to the company's 401(k) match—5 percent of the employee's compensation—deposited to their 401(k) accounts even if they don't otherwise contribute to their 401(k).

Unum and Abbott both use current benefits—payment for accrued but untaken PTO and 401(k) match contributions, respectively—to support student loan repayment. Helping employees to repay student loans by redirecting existing benefit dollars, rather than funding what could be an expensive new benefit, is a cost-effective strategy.
(SHRM Online)


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