Student loan debt is among the biggest financial worries for millennials, but help could be coming from their employers.
Fidelity Investments on Thursday launched a new financial program aimed at businesses, which will allow them to help workers pay off student debts.
The Student Debt Employer Contribution Program works in a similar way to company-offered 401(K) retirement plans, with employers agreeing to contribute lump sum payments every month to pay down an employee's student loan.
Contributions are made post-tax rather than pre-tax like a 401(k), but Buzzfeed reports that discussions are underway in Congress to give student loan repayment programs the same tax exemption as 401(k)s, making them even more attractive for companies to offer.
Even without the tax exemption, Fidelity thinks it could be something employers want right now to encourage employee loyalty. A study carried out for the company found 86 percent of young workers would commit to their employer for five years for help paying off their student loans.
Currently, some 44 million Americans owe a staggering $1.45 trillion of student loan debt between them, StudentLoanHero notes, and those aged 20-30 years old are paying off on average $351 a month.
This "weighs heavily" on young workers, Fidelity notes, and not only puts them under budget pressure in their everyday lives, it's also leading graduates to delay or limit the amount of saving they're doing for retirement.
Student loan expert Mark Kantrowitz told Buzzfeed that just 4 percent of companies currently offer student loan repayment programs, but that number is likely to rise simply because "millennials care more about paying off their student loans than they do about saving for retirement."
The Tip Jar's view: This should not replace retirement saving
The student loan repayment program sounds like a great opportunity for workers to pay down their debt. But I wouldn't be happy to see employers offering the student debt payments instead of a 401(k) – ideally they should offer both.
Paying off student loans is important, don't get me wrong, but it's not as vital as starting your retirement saving as soon as possible.
Even if you save a small amount into a 401(k) in your 20s, the value of that when you come to retire could be huge because of investment growth and compound interest.
Student loan debt, on the other hand, often comes with low interest and options to reduce your payments if you're not earning much.
Financial expert Nicole Middendorfe told The Tip Jar that paying off high-interest debts like credit cards and personal loans is also more important than paying down your student loans (though you should obviously meet your minimum payments).
Prioritizing 401(k) saving over additional student loan payments will almost certainly work out to be more financially efficient in the long run, even though it's understandably frustrating in the here and now.