Pay student loans or save for retirement? These employees don’t have to choose
The Travelers Companies is offering a new benefit to help its employees tackle one of the biggest financial issues plaguing Americans today — student loan debt.
About 45 million borrowers owed more than $1.56 trillion in student loan debt at the end of 2018, according to Student Loan Hero. That is about $521 billion more than the total U.S. credit card debt. It also would rank as the 12th highest GDP in the world, ahead of Spain, Mexico or Australia.
Beginning in 2020, employees of the property/casualty insurer who are using the Paying It Forward Savings Program toward their student loans will also qualify for the company’s 401(k) plan matching program.
So when an employee makes a payment toward his or her student loans, Travelers will make a contribution of that amount to that employee’s 401(k) account, up to 5% with a maximum of $6,500, of the employee’s eligible compensation.
For instance, if an employee is contributing 2% of his or her salary to their 401(k) and they are paying 3% of their salary toward student loans, Travelers will contribute a total of 5% of that person’s salary to their 401(k), says company spokesperson Matt Bordonaro.
Prospective employees may be weighing debt relief options offered by potential employers when deciding where to go to work. And for those struggling with student loan debt, planning for retirement may not even be on their radar. Indeed, 41% of 18-to- 29-year-olds say they have no retirement savings, according to the Fed’s latest report on the Economic Well-Being of U.S. households.
In fact, some would prefer their employers offer student loan debt relief help over 401(k) contributions.
Travelers says it wants to offer its employees the opportunity to do both.
“We have the most talented workforce in our industry and benefit immeasurably from the education and expertise they bring to their work,” Travelers CEO Alan Schnitzer said in a statement announcing the program. “Yet many of our colleagues all too often struggle to save for retirement because student loans weigh so heavily on their finances. Investing in their education shouldn’t stop our employees from investing in their future. We are promoting a standard of employee care that enables them to do both.”
Student loan affects all levels of investors, even those who are in the highly-sought high-net- worth category. Yet only a small number of companies offer debt relief benefits to their workers. Indeed, only last August did the IRS allow an unnamed company to offer a student loan repayment benefit as an element of its 401(k) plan.
Offering a benefit like this, Bordonaro says, “will help Travelers compete for talent who may be burdened with student loan debt and deciding on which employer might best meet their needs.”