Millennials are feeling the crush of student debt—but they aren’t the only ones. Generation Xers and Baby Boomers are also struggling to pay off their student loans or the loans they incurred to fund their children’s education.
As a result, a growing number of employers are adding student loan refinancing programs to their voluntary benefits packages and total rewards strategies. Student loan refinancing programs (such as SoFi) enable workers to pay off their student loans faster, often saving borrowers thousands of dollars over the lives of their loans—money that can be put toward living expenses or the funding of other employer-sponsored benefits such as 401(k) and retirement savings programs.
In addition to providing access to a student loan refinancing program, employers can help workers by offering them sound financial guidance like these six practical (yet often-overlooked) strategies for repaying student loans more effectively:
- Getting organized is step one. Employees with multiple loans often have trouble keeping track of everything—especially those with multiple lenders. These individuals should load all of their loan information into a spreadsheet or use online tools such as those provided by tuition.io to get better organized.
- Sign up for automatic payments. Setting up auto payments with lenders minimizes the chances of missing a payment (which hurts borrowers’ credit scores). And many lenders offer a .25% interest rate discount for setting up auto payments.
- Consider bi-weekly payments. Paying every other week (as opposed to monthly) results in an extra month’s worth of payments every year, which can save borrowers a significant amount of money on interest. It also helps them pay off loans faster. In addition, paying more than the minimum amount is a wise strategy for those who can afford it. Even an extra $20 speeds up the repayment timetable and saves on interest.
- Review your options and think about refinancing. Prepaying, changing repayment plans, and refinancing are three options employees should consider if they want to reduce the money they’re spending on interest. Refinancing at a lower rate is often worth exploring soon after borrowers leave school, increase their income or improve their credit.
- Look into federal loans. Although there are only a handful of lenders who refinance federal loans, it can be an attractive, cost-saving option for many borrowers with high-interest-rate Direct unsubsidized and PLUS loans. But, as with any refinancing, borrowers should do their homework before refinancing federal loans with a private lender.
- Seek forgiveness. Federal loans might be eligible for forgiveness; however, these benefits don’t transfer to private lenders through the refinance process. The most common federal loan forgiveness programs are for borrowers in the military, those who work in public service or education, and those who utilize one of the government’s income-driven repayment plans such as Pay As You Earn (PAYE).
While they’re simple enough, these six strategies can make a world of difference to the financial well-being of your workforce.
Giving employees the programs and guidance they need to ease the crushing effects of student debt helps them take greater control of their current finances as well as secure their financial future. What’s more, it positions your organization as a true employer of choice—not only to current generations of workers but for those to come.
About the Author:
Dan Macklin is co-founder and vice president of SoFi, the nation’s second largest marketplace lender. SoFi offers mortgages, personal loans, student loan refinancing and more to high achieving professionals. Previously, Dan spent 12 years at Standard Chartered Bank leading enterprise sales and product development across London, Singapore and Shanghai.