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As student loan payments restart, how to help employers stand out

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The cost of higher education has skyrocketed to unprecedented levels at an annual rate of 2% over the past 10 years, making it harder than ever for future college students and their families to adequately prepare. 

Despite efforts to get ahead of these costs, a survey conducted by Betterment at Work revealed 43% of recent Gen Z graduates are burdened with student loan debt. As the Supreme Court and denied the White House's efforts to provide loan forgiveness, many borrowers are not prepared for repayments to resume this month. 

At the same time, working parents are faced with a difficult dilemma: choosing between saving for retirement or funding their children's college education. Our same survey found that 57% of parents saving for college admit they've postponed retirement goals in order to support their children's future. Luckily, the stress created by funding higher education is something benefit advisers can encourage employers to help address, giving employees the resources they need to take control of student financing through education-focused benefits.

Read more:  Student loan payments are starting up: Here's a look at Biden's SAVE plan

There are a number of different benefits options available for employers to support employees with their education-savings goals. One way to do this is by educating employers on the importance of offering education expense-focused benefits, such as a 529 education savings plan — an investment account designed to help families save for future education expenses. 

Funds can be used for a variety of qualified education expenses, including college tuition and fees, books and supplies, some room and board and (in many states) even K–12 tuition up to $10,000 a year. By providing a simple, tax-advantaged way for parents to begin stowing away funds for their children at an early age, they can lessen the chance that they'll be forced to dip into their own retirement or investment accounts later in life to front massive bills for education expenses.

There have been promising developments on the legislative front to help expand the options that people have for their 529 funds. The recently-passed SECURE Act 2.0 now enables investors to roll over unused 529 funds into a Roth IRA, ensuring no money set aside for college is left on the table and increasing the flexibility that savers have over how to deploy these funds. Employers can further encourage participation by offering matching contributions or automatic payroll deductions to their 529 plans. 

Read more: 15 remote-friendly companies providing student loan benefits

Employers also should consider benefits like educational-assistance programs, tuition reimbursement, scholarships, access to financial advisers, or student loan management solutions to alleviate the financial strain often felt post-college. 

We've observed that offering student loan management solutions has grown significantly in popularity over the past few years. It's a benefit that we know employees are increasingly craving, with more than half (51%) of the employees we surveyed believing that employers should play a role in helping people pay off student loan debt. By offering these benefits, employers show they genuinely care about their employees' financial well-being, while also helping to lighten the long-term financial load that comes with higher education.

SECURE Act 2.0 also provides new opportunities for employers to bring their student loan management solution closer to their 401(k). Beginning on January 1, 2024, employers can elect to offer an employer match into their 401(k) for qualified loan repayments. That means employees who are repaying their loans but unable to make employee contributions into their 401(k) accounts still would be eligible to receive a match. 

Read more: Schwab and Vault help employees juggle retirement savings and student debt

A one-size-fits-all approach no longer suffices in serving today's diverse workforce. Customized benefit offerings, including retirement plans, healthcare options and education-focused benefits, are essential to address the unique needs of different demographics. This is particularly true for groups that may be disproportionately affected by the cost of higher education or the pay gap.

In the face of this mounting financial burden on working parents and recent graduates, advisers can play a crucial role in guiding employers toward the types of education-focused benefits that will help them best support all employees in their financial journeys. By offering solutions to manage the costs of college (from saving to paying off debt), employers can empower their employees to pursue education without compromising their own financial security. 

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