When discussing the student debt crisis, most people focus on the rapid growth in outstanding debt and several recent milestones. But these milestones don’t tell us much about the impact of all that debt on the students who must borrow to pay for a college education. Average student loan debt at graduation has been growing steadily over the last two decades. Student loan debt is increasing because government grants and support for postsecondary education have failed to keep pace with increases in college costs. This has shifted much of the burden of paying for college from how To Loan Money To Family federal and state governments to families.
The government no longer carries its fair share of college costs, even though it gets a big increase in income tax revenue from college graduates. Since family income has been flat since 2000, students must either borrow more to pay for college or enroll in lower-cost colleges. That shift in enrollment, from private colleges to public colleges and from four-year colleges to two-year ones, has also been responsible for a decline in bachelor’s degree attainment among low- and moderate-income students. In a recent policy paper, I defined student loan debt as affordable if half of the after-tax increase in income that a student gains from obtaining a college degree is sufficient to repay that student’s loans in 10 years or less. 45,000 in 2015, according to the National Association of Colleges and Employers.
35,000 in student loans over a 10-year repayment term. Beyond Longitudinal Study and found that the percentage of bachelor’s degree recipients graduating with excessive debt grew from 9. If the percentage has continued to grow at the same rate, about 16. However, even this percentage underestimates the problem. That’s because it includes all students who graduate with a bachelor’s degree—even those without any debt at all. Perhaps not surprisingly, they are also more likely to say that their undergraduate education was not worth the financial cost.
Unfortunately, there are no similar studies that can be used to analyze excessive debt for other college degrees, such as associate degrees, certificates, and graduate or professional-school degrees. It is also not possible to evaluate the financial impact of student loan debt on students who drop out of college, even though they are four times more likely to default on their loans. Increasing national awareness of college spending is the first step in exercising restraint. It is therefore imperative that the federal government and the colleges and universities begin tracking the percentage of their students who are graduating with excessive debt each year. This information can then be used to improve student loan counseling.
Colleges must also be given better tools to limit student borrowing. For example, college financial aid administrators must be permitted to reduce federal loan limits based on the student’s enrollment status and academic major. Students who are enrolled half-time should not be able to borrow the same amount as students who are enrolled full-time. Finally, our colleges must also help students better understand the debt they are taking on, by making the distinction between loans and grants clearer in their financial aid award letters. Mark Kantrowitz is one of the nation’s leading student financial aid experts. He is the author of several books about paying for college, including Filing the FAFSA, Twisdoms about Paying for College, and Secrets to Winning a Scholarship.
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ETF and Mutual Fund data provided by Morningstar, Inc. P Index data is the property of Chicago Mercantile Exchange Inc. Powered and implemented by Interactive Data Managed Solutions. Penguin Random House, the world’s largest book publisher, is the latest employer to offer help paying down workers’ student debt. Stephen Baillie had just started working at Chegg when the company introduced one of today’s most sought-after work perks: help paying off student loan debt. 1,000 to his student loan account.
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Baillie, a stock administrator at the textbook rental and online tutoring company. 27,000 after about five years of payments. More than just attack his debt, the extra money has given his family more flexibility with their budget, freeing up cash for items they otherwise might have to skip, such as music lessons for his three daughters. Chegg was an early adopter of this growing workplace benefit, but dozens more companies have launched similar programs in the past year.
Markus Dohle, CEO of Penguin Random House, sees the benefit as a way for the company to help tackle a broader societal problem of climbing student debt. 2016, according to the Society for Human Resource Management’s annual report on employee benefits. Student loan repayment looks to be 2017’s hottest workplace benefit, though. More than three-quarters of young professionals in an American Student Assistance survey said help paying off their student loans would be a major factor in deciding to accept a job offer. Surveys also have shown that young workers don’t feel able to fully take advantage of a company’s retirement benefits because of the burden of their monthly student loan bills. Jen Cantu, vice president of people at Trendkite, a public relations analytics firm that is in the process of designing its student loan contribution.
Gradifi, which will administer the benefit for Penguin Random House, says it has 20 companies on its platform now, but more 700 have inquired about it in the past year. While giving actual money to employees to pay down their student loan payments is relatively rare, many more companies offer workers other benefits tied to student loans, and those often serve as a stepping stone to financial contributions, benefits administrators say. So far about a dozen companies have expanded their offerings from access to educational resources and refinancing to a direct financial contribution, says Catesby Perrin, vice president of business development. The program uses a series of questions to help employees figure out if they qualify for consolidation or refinancing, for example.
Tony Aguilar, founder and CEO of Student Loan Genius. About two-thirds of employees who’ve used the program are changing their repayment strategy. Holly Kleiman, a benefits consultant and vice president at USI Insurance Services, says her clients see student loan repayment assistance as both a recruiting tool, to attract the candidates right out of college, and a retention tool, to get young workers to stay put longer. She often recommends companies replace tuition assistance, a long-time benefit in which employees are reimbursed for furthering their education, with a student loan repayment contribution.
Payments to employees’ student loan accounts are currently considered income, so you’ll have to pay taxes on the benefit. There may be a way around that, however. Student Loan Genius this summer rolled out a new component of its platform that allows employers to match employees’ student loan payments with non-taxable contributions to their retirement accounts. With benefits administrators such as Gradifi, Student Loan Genius, Tuition. Some employers offer monthly payments, others one-time lump sums, and payments can be used to pay down private or federal loans.
Some companies design their benefit a matching contribution, so employees need to check whether they have to continue making their own payments in order to receive it. The benefit can be restricted in other ways, too. The benefit is almost always tied to an individual’s current student debt and cannot be applied retroactively. That means if you’ve already paid off your debt, then you can’t take advantage of it. That aspect—that employees who don’t have student debt aren’t gaining anything from the benefit—is one of the few criticisms of the emergence of student loan repayment assistance. Student Loan Genius has a form on its website for employees to submit their company’s and human resources department’s contact information, and Student Loan Genius will then pitch its platform to that employer. Dozens of requests come in every day from that, Aguilar says.
Kleiman, the benefits consultant, also suggests that employees talk with their HR department about offering the benefit or ask about getting millennial representation on the company’s benefits committee so the priorities of young employees with student debt are considered when building the benefits package. And job hunters shouldn’t shy away from inquiring about the possibility of a student loan benefit, especially if it’s offered by competing companies. Still, the real key to getting more employers, including yours, on board might be in the hands of lawmakers. Several bills in Congress would declare employer’s student loan payments tax-free up to certain limits, making the benefit far more attractive to employers as a recruitment and retention tool.