Employee Benefits that Really Impact Financial Wellness
Last week, the release of early college admissions decisions launched a Twitter thread about surviving rejection.
It also inspired this tweet:
“It’s also true that many students *will be* accepted to the college of their dreams and not be able to make the finances or logistics work. They will be ok!”
If only students believed it (that they’ll be ok if they can’t afford their choice).
Unfortunately, history has shown that many prospective students will be undeterred by insurmountable financial hurdles, instead risking their financial futures in exchange for a name-brand school. It’s a big gamble since there are no guarantees a name-brand will pay off any bigger than a lesser name, or that it will make paying loans off any easier.
The conversation's important, especially with new data showing college debt has more than doubled ($685 billion to $1.5 trillion) in just nine years. It’s not just the amounts growing; the cost to borrow is going up, too. “The interest rate for a direct student loan disbursed on or after July 1, 2018, and before July 1, 2019 is more than 100 basis point higher than those issued in 2012,” writes Bloomberg, “adding to the concern about the size of student loan debt outstanding.”
Employee Benefits that Have Real Impact
Employers are understandably concerned. Financial wellness has a big effect on productivity. “Employees who spend time during their day worried about bills and loans are less focused on getting their work done,” writes one financial expert. Student debt responses could be the single most impactful way employers can affect it.
Skyrocketing loan amounts have already inspired growing numbers of employers to launch student loan repayment programs. Pairing it with solid advice on paying the rest does double duty, shortening the loan, and bestowing the confidence of paying the rest.
But there’s a good argument for complementary education advice to prevent tomorrow’s before it happens. The race to college makes normally sensible people do crazy things – like putting the whole family in hock (or emptying 401ks!) to afford a child’s dream school. That practically guarantees a higher cost since one study shows the laws of supply and demand dictate higher prices at the 100 or so schools everybody’s after.
Factoring Affordability as Well as Dreams
Advisors who inject perspective – ensuring employees with teens consider cost, not just window-sticker cachet – can keep today’s 18 year olds from committing themselves to a lifetime of financial hardship. A famous name, says College Coach’s Elizabeth Heaton, can’t ensure success in life any more than a degree from a little-known school can be a barrier to it. On the other hand, imagine the freedom of a life without five figures of debt. Just as important, advisors help families understand what payments on that $20,000, $50,000, or $100k loan will look like. One heavily indebted graduate told the Times all college students should carefully assess student loans freshman year. Better yet would be assessing those amounts before signing for them.
Advice for children of employees may seem like a long lead – especially next to student loan repayments that can actually reduce today’s debt. But draining retirement for a kid’s college is indeed today’s emergency. Plus, four years goes by in a hurry. So heavily leveraged high school seniors today quickly become employer financial wellness problems tomorrow.
Some debt is likely always a part of the education equation. But at this rate of rise, $3 trillion in debt is in sight. So a multi-faceted financial wellness strategy that can knock off a few zeroes? That’s in everybody’s best interest.
August 1, 2020