Piggybacking on the success of its student loan payback platform, Tuition.io announced that it will now begin supporting parents who have taken out loans to help finance their children’s college educations.
Tuition.io allows employers to contribute money towards employee student loans as part of their overall benefits package. By also covering Federal Parent PLUS Loans, companies can address the problem that 35% of total student loans are held by people over the age of 40.
Many plan sponsors are exploring student loan repayment options for their workers because so many of them are saddled with overwhelming debt, making it hard for them to save for retirement or make larger purchases, like a home or a car.
"Throughout our experience working with corporate clients and understanding the burden placed upon parents taking out loans to help their children pursue college degrees, we felt it important to allow employers the ability to contribute to this large, unmet section of the student loan contributions landscape," says Brendon McQueen, CEO and co-founder of Tuition.io, who is also a recipient of EBN’s Dig|Benefits Technology Innovator Award.
A typical employer contribution to this type of benefit is $50 to $200 per month.
“It is an extra payment on top of an employee’s existing student loan payment. It is applied directly to the principal so it helps them accelerate the payoff of the loan and in turn saves people literally years of pay-off time and thousands of dollars in interest,” he says.
Tuition.io launched its initial program in April 2015. Since then, the company has signed on a number of clients, including Fidelity, which launched its program in January.
“We are now helping 6,000 of their employees receive these contributions,” McQueen said.
Employers are interested in this type of a benefit because it “is an incredibly difficult hiring atmosphere, so it is a hiring tool. It is also used as a retention tool. So, in 2014, the average tenure for a person aged 20 to 24 was less than 16 months. And so, as an employer, if you can offer this contribution and keep people in their chairs longer, you get a longer ROI [return on investment],” he adds.
Employers have to find workers, screen them, interview them and train them. It is a lot of work and takes a lot of time. If workers don’t stay after all of that investment, it is a “huge loss in productivity,” McQueen says. “If you can affect the current employee turnover rates by just 2-3%, then these contribution plans typically pay for themselves, which is pretty cool.”
The cost of higher education has doubled since 2000 and people are graduating with an average of $35,000 in student loan debt.
“How are you supposed to think about retirement if you have that hanging over your head?” asks McQueen. Most student loans require you to start repaying the loan six months after you graduate.
Tuition.io sends contributions directly to the organization that holds an employee’s student loan.
Many older people don’t want to admit that they took loans out for their children. The enrollment process in this benefit is easy and an employee can enroll without having to discuss the issue with their employer, which McQueen believes will increase adoption.
Baby boomers will benefit greatly from this type of program, he adds, because they would like to retire eventually and they can’t do that with these student loans hanging over their heads.
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