A growing number of recent college graduates have a new ally as they start repaying their student loans — their employer.
More employers are launching benefits programs that help workers reduce their college debts, including making direct payments to lenders and offering online tools to help employees track their loan balances and repayment options.
Some companies are also matching an employee’s student loan repayments with contributions to a 401(k) retirement plan.
For graduates of the Class of 2019, late fall marks the end of a six-month grace period, meaning students now must start paying down their student loans.
More than two-thirds of recent college graduates have student debt, with the average balance hovering near $30,000, according to savingforcollege.com.
According to a report earlier this year by the Sallie Mae financial services firm and its Ipsos research partner, students are solely responsible for repaying their loans in 64% of the families surveyed. Only 2% of the families surveyed said the parents will be responsible for making those monthly payments.
But a growing number of companies want to be part of the debt-reduction solution. According to a survey last year of 250 companies by the Employee Benefit Research Institute, 11% offered student-loan repayment subsidies and 13% planned to add it as a way to attract and retain employees.
The corporate ranks include Kronos Inc., Hulu, HP, Travelers Cos., Raytheon, Abbott Laboratories and Fidelity Investments.
For example, Fidelity spends about $13 million a year on its Step Ahead benefit for employees who meet certain requirements, according to a Wall Street Journal report. The company covers up to a lifetime maximum of $10,000 in student-loan debt repayments.
If your company’s benefits package doesn’t include a loan repayment perk, ask why not.
Here are some tips from Sallie Mae to help recent grads get off on the right foot in paying back their loans.
*Know to whom you owe: Is it the Department of Education, or a bank or other private lender? Determine how much you owe, including the interest rate and the monthly due date.
*Build a budget: Student loans might not be your only regular monthly expense. There could be credit card debts, rent, groceries, the cable bill and other utilities. To see how far you can stretch your paycheck, check out budget worksheets online at sites such as Sallie Mae.
*Make payments automatic: It’s a no-brainer for avoiding late fees, and you might qualify for a discount on your interest rate of 0.25% or 0.50%. Paying on time also paves the way for building a favorable credit history.
*Stay in touch: Keep your lender or loan servicing company updated on your contact information. If you have trouble repaying your loan, alert your payment processor immediately.
*Fast-track payments: If possible, pay more than the monthly minimum, say $50 or $100, to get out from under the loan faster and to avoid more interest.
(Article written by Steve Rosen)