In a student-worker economy, it is often the case that many must choose between paying off their student loans and saving up for retirement. Companies, which not only recognize the dilemma for recent grads, but also understand the power of student-loan assistance to attract and retain their workforce, have begun to step their student loan assistance “game” up a notch.
Last week, Abbot, the pharmaceutical and medical products company, began a program that would allow its workers to pay off its student loans. It would do so through the assistance of the company while still being able to save up for their retirement.
According to Stephen R. Fussell, the executive vice president of human resources at Abbott, the initiative has been put in place in response to complaints from young workers about “crippling student-debt obligation.” According to Fussell, Abbott hopes that the new student loan assistance will be a way of drawing workers in as well as making Abbott more appealing to those current workers that have student loan debt to pay off.
The program is known as the Freedom 2 Save program, and through the new program, employees who contribute up to 2 percent of their pay toward their student loans will receive “a 5 percent match in their 401(k) retirement savings plan.” The deal is offered by Abbott to those workers who also contribute 2 percent of their pay to their 401(k) as well.
According to a spokeswoman for Abbott, the way it works is that if, for instance, an employee who makes $70,000 uses at least $1,400 to pay down their student loan debt, then Abbott will contribute $3,500 to that employee’s 401(k) plan. Abbott illustrated the potential impact of their Freedom 2 Save program:
“Employees who join Abbott with a salary of $70,000 could accumulate $54,000 in their 401(k) account over 10 years, assuming a 6 percent average annual return and yearly merit increases of 3 percent, without any retirement contribution of their own.”
Paying debt and retirement saving
Since 2015, employer loan repayment plans have risen from 3 percent to 4 percent, according to the latest survey from the Society for Human Resource Management. “Typically, employers make a lump-sum, after-tax payment, monthly or annually toward an employee’s student loans.”
But the difference between most programs and programs like Abbott’s program is Abbott’s Freedom 2 Save Program not only helps its employees pay down their student loan debt but also encourages saving for their retirement at the same time. In a debt climate that owes upward of $1.5 trillion in student loan debt, there is often very little cash left for saving for retirement. According to Fussell, every decade that retirement savings are put off roughly doubles the amount needed to be saved. “It all starts with starting early,” Fussell said.
Rariety Monford, 26
Rariety Monford is an engineer in Abbott’s professional development program. Monford owes approximately $80,000 in student debt and graduated from North Carolina Agricultural & Technical State University in 2016. Monford pays about $800 a month in loan debts, and says that paying off her student debt is “her No. 1 goal.” Monford admits that retirement feels like a very, very long way away. As such, having an employer that is looking ahead for her feels like quite an asset to her indeed. “I’m thinking of the immediate, here and now,” she said.
In the age of rampant student debt crisis, it seems that companies and businesses are stepping up to help carry the load. Whether the choices on the part of these companies and businesses are completely altruistic are more or less irrelevant so long as they successfully do their part for those swimming in debt and worrying about their future vis-à-vis retirement.
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