Student loan debt is burdening millennial employees, who could be losing out on hundreds of thousands of dollars in retirement savings.

A 22-year old beginning a career with $30,000 of student loan debt could reach retirement with $325,000 less than a peer who is not burdened with an education loan, according to new research findings from LIMRA Secure Retirement Institute. While average student loan debt hovered around $10,000 in 1990, LIMRA notes this year averages topped about $33,000.

Some employers, like professional services firm PricewaterhouseCoopers, announced this year that they’d begin offering a new benefit to eligible employees of $1,200 a year for up to six years, paid directly to the employee’s student loan, to help pay off college debts.

Also see:PwC, Starbucks take different approaches to helping workers pay for college.

The idea of financial wellness is gaining momentum, with employers offering more educational programs and tools designed to help employees manage the money pressures that come with juggling everything from student debt to mortgages, and from eldercare to college tuition and 401(k) contributions.

There are a number of employers exploring ways to assist employees with student loan debt, says Betsy Dill, a senior partner in Mercer’s retirement business. There are a number of approaches that are currently utilized, she says, including: 

  • Providing employees information and counseling, such as via financial coaches, so they can prioritize debt repayment and saving within their budgets.
  • Access to refinancing – some employers are providing access to refinancing so their employees can potentially negotiate better repayment terms for their student loans.
  • Subsidized refinancing – in this case, employers provide access to refinancing where the rates are subsidized to improve the terms of the loans.

Also see:Student debt repayment takes priority over retirement planning.

The recession impacted millennials’ at the start of their careers, with many ending up unemployed or underemployed for years after they graduated, LIMRA notes.  Additionally, 9 in 10 will not have access to a defined benefit plan, and are likely to have to fully fund their retirement themselves. 

There is, however, some good news, the research firm says, noting companies that administer 401(k) and other defined contribution plans report high participation rates by millennials; however, the bad news is that millennials with student loan debt are saving at a lower rate.

“The main takeaway from our research is that student loan debt can have long-term consequences,” says Mark Morris, a spokesman with LIMRA. “Employers who inform their workers about the lasting impact of student loan debt can help them make more informed decisions.”

Millennials without student loans are 60% percent more likely to maximize their employer match compared with those who are paying education loans, the study notes.

“The millennials are the largest and most diverse generation that the U.S. has ever seen,” Mercer’s Dill says. “As employers look to help younger people, they have to start by recognizing the diversity of the group, which also means diversity of financial situation.”

Also see:The voluntary benefit that's addressing a major employee concern.

Generally all younger employees need help figuring out how to make ends meet against the backdrop of very different personal circumstances, she adds. Employers can help by recognizing that it is important to help employees to establish good financial habits – paying down debt, creating some emergency savings, and then saving for retirement. 

“This means that employers also have to do a better job of meeting their young workers where they are,” she says, pointing to a differentiated outreach program to connect younger employees with the resources that can help them now versus blanket communications about saving for retirement.

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