While employers and employees alike have had to adjust and demonstrate resilience for most of 2020, college students have also had to change their habits amid a tumultuous year.
A recent survey by AIG Retirement Services revealed that the pandemic has levied a tremendous amount of additional financial stress on current college students, which could influence what they desire from an employer when they enter the workforce.
The survey revealed that college students are developing strong financial habits amid the pandemic, as 75% said they stop spending when cash is running low, which is an increase from 64% in 2019. Additionally, 57% report always making more than the minimum payment on their credit card, which is up from 42% in 2019.
“Despite the toll the pandemic has taken on their well-being, college students have proven to be resilient in the face of hardship,” said Rob Scheinerman, CEO of AIG Retirement Services. “This generation is demonstrating positive personal finance behaviors that will make a real difference for their future. Our hope is they come out of this pandemic safely and in good health — prepared with the financial tools that can serve them well for years to come.”
The survey also found that 76% of college students plan to make their student loan payments on time and in full; representing an increase in the percentage of college students saying the same in 2019. Sometimes, however, carrying the burden of student loans and other debt prevents these new employees from saving for retirement, because of the need to reallocate their resources toward paying off debt.
This is where employers can step in and lend a hand, Scheinerman said.
“We see more graduates interested in assistance with their student loans. Providing that could be a competitive advantage for employers,” Scheinerman said.
“Young people have the advantage of time. While they want to pay off the student loans, it’s also important that new workers start saving for retirement. The benefit of starting young at age 22-24 can add up over time through the value of compound interest. If you lose those first five years, you don’t get that back. You can try to make it back up, but you lose that great advantage of having time on your side. So if employers can support both—student loan repayment and retirement savings—it’s really powerful.”
Employers can accomplish this thanks to an IRS private letter ruling in 2018, which allows companies to provide employees with a typical 401(k) match while paying off their student loans. Abbott Laboratories championed this movement in 2018 with its “Freedom 2 Save Program,” which dictates that, if an Abbott employee puts at least 2% of pay toward student loans, the company will contribute 5% of their pay into a 401(k) account.
Organizations can also find additional or alternative ways to ease student debt, such as providing assistance to emergency spending accounts. The more innovative an employer gets, the more they will likely benefit in acquiring motivated talent from the college ranks.
“If employers think creatively about how to steer benefit dollars to help pay down student debt, it will generate loyalty among their employee base,” Scheinerman said. “We know that student loans are a high cause of stress. Employer assistance can reduce that stress, increase productivity and will probably lead to longer retention. It’s mutually beneficial to employer and employee to have effective programs like these.”
About the Author
Brett Christie is the managing editor of Workspan Daily.