Betterment at Work senior director of product management Edward Gottfried joins Brad Smith on Wealth! to discuss how some employers are helping take some of the pressure off their workforce and what it means for borrowers. Gottfried tells Yahoo Finance, “It's not that common yet for employers to play a direct role in supporting their employees with student loan debt, but that's changing relatively rapidly.” He says, “Recent legislation that went into effect at the beginning of this year makes it possible for employers to treat student loan payments as eligible for a 401(k) match. So what that means is that their employees who are actively repaying student loans but may not be able to contribute enough to reach that 401(k) match can instead show evidence to the 401(k) of the student loan repayments and get an employer match into their 401(k). So that's sort of an interesting indirect way for employers to play a more active role in supporting their employees.” “The other thing that some employers do is they will directly contribute to loans. So they'll maybe match repayments dollar for dollar into student loans,” Gottfried says, though he notes this option is “certainly less common.” Gottfried says that a rise in student loan repayment support reflects employers doing “anything that you can do… to create a little bit of a competitive edge for hiring or for retaining talent.” He compares the rise in student loan benefits to 401(k) offerings, saying, “The 401(k) has become really a table stakes benefit across employers of all sizes, while traditionally it was reserved for really large employers, now even small employers are offering it.” For people looking for employer support in paying their student loan debt, Gottfried says, “The most important first step is [to] ask your employer what they do, what they support, whether this is part of the 401(k) program, whether they have a separate program to directly support you in repaying your student loan debt.” He adds, “If they don't, I think it's really important to make clear to your employer that that's something that you would highly value. And if they do, they should be able to give you some instructions on how to take advantage of it.” To watch more expert insights and analysis on the latest market action, check out more Wealth here.
Over 42 million Americans own, they owe,
more than $1.6 trillion in student debt and loans,
according to WalletHub.
That averages out to about $38,000 in loans per borrower.
But all that cash doesn't have to come from the debtor.
Some employers are also helping alleviate
that student loan pressure.
Here with the latest, we've got Edward Gottfried,
who is the Betterment at Work
Senior Director of Product Management.
Great to have you here with us.
So what's, in terms of the percentage,
do you see some of the employers
helping their employees out with?
It's a great question, Brad.
You know, what we're seeing is that, in general,
it's not that common yet for employers to play a direct role
in supporting their employees with student loan debt.
But that's changing relatively rapidly.
And I think the dip in the chart that you just showed
is sort of evidence to that.
Back in 2019, it was only about 8% of employers
who were offering any kind of support
for their employees with student loans.
But recent legislation that went into effect
at the beginning of this year
makes it possible for employers
to treat student loan payments
as eligible for a 401k match.
So what that means is that their employees
who are actively repaying student loans,
but may not be able to contribute enough
to reach that 401k match,
can instead show evidence to the 401k
of the student loan repayments
and get an employer match into their 401k.
So that's sort of an interesting indirect way
for employers to play a more active role
in supporting their employees.
Now, the other thing that some employers do
is they will directly contribute to loans.
So they'll maybe match repayments dollar for dollar
into student loans.
It's certainly less common than the 401k treatment.
And so, as we're thinking about this,
we also have to think about it in the context
of where there is some call normalization
or some call attrition within the workplace
or even turnover within the workplace as well.
Especially given that the labor market
is vastly different than it was even two years ago,
which kind of starts to account for some of that dip
that we may have been seeing towards the end of that
as minimal as it is.
But all of these things considered,
when you do see a changing in the mind frame
of how employers are looking at the labor market,
how does that also trickle through to the amount of them
that are paying off and helping pay off student loans?
I think the one thing that you are seeing
is a pretty stiff level of competition for talent.
A great thing that's happened in the last five years
is that the 401k has become really a table stakes benefit
across employers of all size.
While traditionally it was reserved
for really large employers,
now even small employers are offering it.
There've been state mandates
across a number of different states
that have made it a requirement for small employers.
And so as a result,
anything that you can do as an employer
to create a little bit of a competitive edge
for hiring or for retaining talent
becomes really, really potent.
And I think that's part of what we're seeing
drive more employers to adopt
a student loan repayment benefit,
either in concert with their 401k
or as an independent offering.
And the other thing that you're seeing
is with the end of the student loan repayment moratorium,
this is more of a top of mind issue
for employees and employers both.
And that's helped to move many employers
who were maybe considering for several years
the possibility of adding on this benefit
and bringing them into actively sponsoring
or rolling out benefits
to help their employees with student loans.
So what tips do you have for people
who are trying to make sure that they can take advantage
of this potential benefit with their employer?
Well, I think the most important first step
is ask your employer what they do,
what they support,
whether this is part of the 401k program,
whether they have a separate program
to directly support you in repaying your student loan debt.
If they don't, I think it's really important
to make clear to your employer
that that's something that you would highly value.
And if they do, they should be able
to give you some instructions
on how to take advantage of it.
There may be a separate place within the 401k platform
where you can go to give evidence
of the repayments that you're making
that your employer will then take into consideration
for making an annual employer match into the 401k.
Edward Gottfried, who is the Betterment at Work
Senior Director of Product Management.
Thanks so much for taking the time, Ed.
Thank you, Brad.
