Companies Look to Help Older Employees by Expanding Student Loan Repayment Assistance to Parent PLUS Loans
New graduates aren’t the only ones dealing with student loan debt, so are their parents. Close to 17 percent of student loans are held by people over the age of 50, with thousands of Parent PLUS borrowers covering a portion of their children’s education. At the same time, the default rate on these loans are on the rise as consumers struggle to pay off the loan, save for retirement and even work on their own student debt all at once.
And while most employers are focused on helping their millennial employees with their suffocating student debt, older employees can use the help too. “About 1 in 6 graduates have benefited from Federal Parent PLUS loan debt. Federal Parent PLUS loan dollar volume has doubled in a decade,” says Mark Kantrowitz, publisher and VP of strategy at Cappex.com.
That is the genesis behind Tuition.IO’s latest offering. The company that enables employers to pay a portion of their employee’s student loan debt has created a platform for employers to make extra payments toward employees’ Parent PLUS loans. A natural extension of its current service Brendon McQueen, founder and chief executive of Tuition.IO, says Parent PLUS loans are an untapped area that needs the assistance.
“About 17 percent of people who take out new loans have a supplemental Parent PLUS loan,” says McQueen. “Quite a few of these parents are looking at retirement. If employers are able to help them offset the cost of these loans, it will enable them to realize retirement in a greater capacity.”
Student loan debt doesn’t discriminate by age
There’s no question student loan debt is creating a lot of headaches for all sorts of borrowers from the young to the old. And while younger borrowers hold the lion’s share of student loan debt, there are a lot of older people stuck with it as well. For older borrowers, it can be particularly stinging since many are also facing retirement savings shortfalls. According to a Government Accountability Office report, the outstanding federal student loans held by people over the age of 65 skyrocketed to $18.2 billion in 2013, up from $2.8 billion in 2005. As of 2013, there were more than 700,000 seniors with student loans. Meanwhile, 27 percent of retirees between the ages of 65 and 74 have student loans in default while more than half of the loans held by people over the age of 75 are in default.
Even younger working adults who have more time to save for retirement are going to feel the pain of student loan debt for the years to come. Take the Center for Retirement Research at Boston College’s recent look at what $31,000 in student loan debt would mean to someone’s retirement. It found the percentage of people at risk of not being able to live out the retirement they hope for would increase because of that debt. Student loan debt, according to their research, would have the same impact on retirement as an unexpected health event.
Companies are looking for ways to help
The latest offering from Tuition.IO comes at a time when employers are looking at ways to recruit and retain younger workers. Since many of the employees they are trying to lure cite student loan debt as a major problem, they are looking at ways to tackle it. Being able to help their workers with their debt load is seen as a way to boost morale and loyalty, two things that are crucial to companies of all sizes. And while it’s a no-brainer to offer it to younger employees who are putting off buying a home and getting married because of student loan debt, companies are also interested in helping their older workers.
“There’s about $455 billion in student loan debt held by people over the age of 40 and the fact is no one is really talking about the issue,” says McQueen, noting the company is in talks with employers who want to offer it to their employees. “It’s a stigma that they have these loans and companies aren’t even thinking about it.”
More student debt help coming down the pike
Tuition.IO is part of a wave of start-ups that are enabling companies to tackle the student loan debt crisis which stands at over $3 trillion dollars. Some companies are helping employers pay down some of the student debt held by employees while others are letting companies make an extra contribution to employee 401(K) plans as an incentive to pay down student loans or helping them with their mortgage. This move isn’t the last from Tuition.IO, nor is it expected to be from its competition.
“Parents haven’t been calling for student loan repayment assistance like millennials. However, any extra money from employers is a welcome benefit,” says Kantrowitz of Cappex.com. “I would not be surprised if the next benefit will be matching contributions to 529 college savings plans.”