Companies Pitch In On Student Debt
401(k) savings, but not always. Unclaimed 401(k) accounts often sit in financial institutions for years and eventually are turned over to state abandoned-property agencies, Turner says. “It’s kind of a black hole.”
Turner’s group has urged the government to set up a searchable registry of unclaimed pensions and retirement accounts nationwide, as Britain and Australia have done.
One easy way to keep tabs on a pension or 401(k) when you change jobs is to roll the money over into an IRA or your current employer’s 401(k). There’s a downside, though. A study last year by the Center for Retirement Research at Boston College found that annual returns on IRAs averaged only 2.2 percent from 1999 to 2012, compared with 3.1 percent for 401(k)s and 4.7 percent for traditional pension plans. Higher management fees account for at least some of the difference, the study found. The bottom line Unclaimed U.S. pension benefits may total as much as $8 billion annually. Abandoned 401(k)s leave billions more in limbo. Employers can offer to match payments on student loans Young people have heard the advice again and again: Begin saving for retirement as soon as possible. But before they can start to build their nest eggs, many twentysomethings have to retire student loan debt. “It’s the biggest weight on my life right now,” says Nolan Grace, a 24-year-old who graduated from Purdue University with what he calls “very significant” loans.
Luckily, Grace’s employer, BP3 Global, is helping him with loan payments. The Austin-based software-services company uses a platform called Student Loan Genius to let it match as much as $100 per month Insufficient Funds Percentage of Americans whose retirement income won’t support their preretirement standard of living
age 50-59 of Grace’s debt payments. “We really like the effect it has on our ability to recruit,” says Scott Francis, BP3’s chief executive officer. He says college students seem to be more interested in that benefit than in the company’s health-care and retirement offerings.
CEO Tony Aguilar, 31, helped start Student Loan Genius, also an Austin company, in 2013, building up its customer base to include 45 companies. Employees at companies that have contracted with Student Loan Genius have more than $61,000 in student loan debt on average, and their monthly payments are usually more than $500 a month.
Aguilar, who graduated from college with more than $100,000 in student loans, says he knows as well as anyone how the burden is holding back an entire generation. U.S. educational debt rose to $1.2 trillion last year, six times more than in 2003. The average recent college student has $31,000 in debt. A study released in February by the Center for Retirement Research at Boston College estimates that growth in student debt will eventually increase the share of Americans who will have inadequate income at retirement by 4.6 percentage points, to 56.2 percent.
A January report by Facebook, which analyzed public posts and polled thousands of users anonymously, found that only 13 percent of people age 21–34 see being able to retire as the definition of financial success. Their No. 1 indicator of financial success is being debt-free. How can people stay focused on the faraway dream of retirement when they’re obsessing over meeting monthly debt payments? Aguilar says the way is to link the two. His company can The bottom line Austin startup Student Loan Genius has a service that lets companies sync retirement savings and student debt payments.
Edited by Cristina Lindblad Bloomberg.com