Why your employees aren’t using your 401(k)

RYAN GARDNER  |  JULY 5, 2018

EMPLOYER INSIGHTS

A 401(k) is a great way to build a retirement fund, especially if your company is willing to match the employee’s input. This should mean most if not all employees should take advantage of it and use it right?

Some employees, especially those that are recent graduates, may not use it due to large outstanding student loans. In fact, this is the case for many employees.

THE BURDEN OF STUDENT DEBT

Student loan repayment plans are as important to recent graduates as access to a 401(k) plan. This makes sense because as many as 70 percent of graduates have some amount of student debt. With astronomically high numbers like these, it’s no wonder that some employees find it hard to adequately add to their retirement funds while making loan payments.

Additionally, some states have harsh punishments for unpaid student loans. Defaulting on payments can lead to serious drops in credit scores and it can even limit job opportunities and careers.

CORPORATE CONTRIBUTIONS AND SOLUTIONS

Helping employees pay off their student debts with student loan repayment plans is a great way to help recent graduates pay off their debts and allow them to invest more money into their 401(k) account. Moreover, this type of program increases employee recruitment, retention, and loyalty.

Since 401(k) plans are a way for companies to help workers prepare for their retirement, student loan repayment plans can be treated similarly. In fact, the idea that student loan repayment could one day be as important as a 401(k) plan isn’t that far-fetched. This line of thought has been adopted by many companies and is growing in popularity. The majority of job seekers under the age of 30 are even more likely to accept a job that offers student loan repayment plans.

As the national student loan debt continues to grow past $1.4 trillion, there could conceivably be a day where a student loan repayment plan is valued as highly as a 401(k) retirement plan. This is exactly why we want to form a partnership with your company that helps you and your employees by providing you the guidance and tools you need with this benefit. If you are looking for a way to implement a student loan repayment plan in your company or want more information, get in touch.

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Student Loan Repayment Benefit to enable companies to recruit and retain top talent

PRESS RELEASE – CAMBRIDGE, MA and AUSTIN, TX – May 16, 2018

Vestigo Ventures, an early-stage venture capital firm focused on transformative fintech investments, announced today that it led a $3.5 million Seed Series Prime financing round for Student Loan Genius (SLG), an employee benefits platform that positions companies to recruit and retain top talent by enabling them to repay employee student loan debt. CMFG Ventures, Prudential Financial and Rubicon Venture Capital also participated in the round.

The funds raised will be used by SLG to support commercialization of its offering as well as to grow its technology, sales and marketing teams.

“SLG is driving innovation in employee benefits that hasn’t been seen since the emergence of the 401K decades ago. With 70 percent of the emerging workforce saddled with student loans, it is incumbent on employers to empower the current and future workforce generations to succeed in the market, unencumbered by the high cost and burden of debt,” said Michael Nugent, Managing Director, Vestigo Ventures. “SLG fits within Vestigo’s mission to finance fintech companies focused on worksite management. We are especially impressed with the management team and its actionable go-to-market strategy to bring SLG’s products and services to major companies nationwide.”

In 2017 there were 44 million Americans with $1.4 trillion in student loan debt and that number is expected to rise to 75 million employees and $3 trillion by 2027. SLG enables HR teams to recruit and retain the best talent by offering a student loan repayment benefit. Today major companies like New York Life, Ralph Lauren and Mastercard offer SLG to differentiate themselves in a competitive marketplace.

“In an environment made up of the most educated workforce to-date with the current high employment rate, organizations are becoming keenly aware of the difficulty retaining their best people,” said Matt Beecher, CEO of Student Loan Genius. “This new funding validates Student Loan Genius’ mission and efforts to enable companies to retain their top talent in an increasingly competitive workforce through unique benefits, like student loan payments, that meet their employee’s needs.”

ABOUT VESTIGO

Vestigo Ventures is an early-stage venture capital firm headquartered in Cambridge, Massachusetts that invests in financial technology (fintech) companies. The Firm was founded by David Blundin, founder and chairman of Cogo Labs, Mark Casady, former CEO and chairman of LPL Financial, and Managing Directors Ian Sheridan and Mike Nugent. Vestigo has identified four areas of concentration: market structure, operations solutions, worksite management and personal wealth. Learn more at www.vestigoventures.com.

ABOUT VAULT

Vault, formerly known as Student Loan Genius, is an employee benefits platform that gives employers a cutting-edge in attracting and retaining top talent by offering financial management tools, unbiased advice and employer contributions. Companies of all sizes, including New York Life, Ralph Lauren, Mastercard, and Pinterest offer Vault benefits to differentiate themselves in a competitive marketplace. Vault is on a mission to help companies keep their best people.

VESTIGO VENTURES MEDIA CONTACT:
Danielle DeVoren
212-896-1272
ddevoren@kcsa.com

VAULT MEDIA CONTACT:
Samantha Harris
512-792-2550
SLG@shiftcomm.com

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Student Loan Repayment That’s Faster Than Lightning

Paying off student loans is not an overnight process. There’s a lot of mitigating factors – time, money, and daily expenses – that can hold up forward progress.

The good news is borrowers aren’t alone in the fight for financial freedom. Tools and programs exist that help lower payments or demonstrate the impact of different repayment plans. Student Loan Genius helps dot the I’s and cross the T’s by finding new ways to inform and empower borrowers to fight debt head-on.

Vault allows users to easily view repayment programs that could lower their monthly payments. By doing so, users see what federal repayment plans they qualify for and how the plan impacts their loan payment timeline. If a user finds a repayment plan they’re interested in switching to, he or she can download a step-by-step walkthrough guide that walks through how to make the change.

If paying off debt faster is the priority over changing repayment plans, we can help there too. There’s a “Pay Off Faster” tab for users, which allows users to model how repayment time and interest accrued would be impacted by increasing a monthly payment.

Refinancing is also an option Vault can help with. If a user is curious about refinancing their loans, there’s a section in our tool for that, too. Users can see if the qualify for refinancing without actually pulling their credit. Resources are available to lower interest rates on monthly payments, accrued interest, or adjust repayment time – users judge what works for them.

These 3 perks are huge components of what makes Vault great to offer to employees to help them pay down their student loans. Contact us below to learn more.

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Unpaid Student Loans Could Cost You Your Career

The depth of how student loan debt affects lives goes deeper than a number on a statement reminding the borrower that his or her monthly bill is due. Defaulting on student loans can do more than just affect your credit score – it can cripple your job choices.

According to the Brookings Institute, 30% of jobs now require a certification or license in addition to a college degree, but laws exist in 19 states that allow for state agencies to revoke licenses. Ranging from medical professionals to teachers, game wardens, police, and barbers, anyone who needs a professional license can lose it due to unpaid student loan debt. In South Dakota, they’ll even suspend your driver’s license.

While creditors find new and aggressive ways to punish borrowers who default, revoking professional credentials seems a bit drastic and counterintuitive, but yet, some states still do it as a means of punishment, or at the very least, a means to get a debtor on a payment plan.

The average teacher in Georgia makes between $37,000 – $50,000 a year, so saddling them with, in some cases, $1,300 a month student loan repayment equates to a massive portion of their paycheck. Right now, laws exist in ten states prohibiting new K-12 teachers from working until they get on a student loan repayment plan.

THE STUDENT LOAN CRISIS ISN’T GETTING BETTER

For employers, this model is catastrophic. There’s 1.4 trillion dollars in student loan debt floating around America. There’s an inevitability that some of these borrowers are working for hospitals, firehouses, or local police. Yet, these people cannot work – not because of lack of skills or training, but because a rigid system of repayment doesn’t work in their favor.

One of the biggest misconceptions regarding student loans is the severity of the issue. The average millennial carries around $45-52K a year in student loan debt, which is certainly not a lightweight monthly payment. Student loan debt is the most significant source of income debt, second only to owning a home.

Unfortunately, some of the borrowers in default may not even know they’re in default. It’s possible that with the stress and unpredictability of life their loan statement was lost in time and became an “I’ll get around to it someday” scenario.

REIMAGINING CRIME AND PUNISHMENT

While it’s evident that those in default should have consequences for not paying back what they owe, the question needs to be asked: is there a better way? We can’t strip people of their means of making a living. According to the American Nurses Association, within the next five years, there will be a nurse shortage of almost four million nurses. Houston, Texas needs over 2,000 new police officers. Firefighters are in short supply in Kentucky, New York, Indiana, and Texas. Punishing people ready to fill these roles impacts local economy, whereas a solution to work with borrowers to find a realistic endpoint would prove to be more fruitful. Collectively, we need to do better.

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All Of Your Student Loan Information In One Place

Most employees are uncertain what their student loan big picture looks like. Vault has the answer.

With our platform, users can view their monthly payment, total debt amount, interest, and repayment plan for all of their loans right in the Vault portal.

Like all things Vault, we wanted the user experience to be super clean and super simple. No one wants to dig through pages and tabs trying to understand what this loan means in correlation to overall debt, so we cut out all of the confusion by allowing all the information to be viewed in a single dashboard.

There’s information to potentially help lower an employee’s monthly payment, see how he or she can pay off your loans faster, or check to see if refinancing makes sense.

Depending on an employees’ financial goals, they can each decide what’s best for their situation and future. If you’re interested in offering Vault to your employees as a benefit, contact us.

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Painless Perks: Import Federal Student Loans With Ease

When we update the Student Loan Genius platform, making sure our customers have an easy experience is at the top of our priority list.

Importing NSLDS student loan information shouldn’t be an exhaustive process – users should be able to update and upload their profiles with a few clicks. It’s super simple:

IMPORTING NSLDS STUDENT LOAN INFORMATION

It’s that easy to import data with Genius Advisor. This is just one of the great features we offer your employees with our benefit platform. To learn more, contact us.

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What you need to know about California and Student Loans

California is leading the charge in helping people with their student loan debt. For the federal government and in other states, student debt that has been canceled or forgiven is treated as taxable income.

So if a borrower has $90k forgiven, that adds $90k to their taxable income for that year. However, California has expanded income tax exclusion for canceled or forgiven student loan debt.

Starting in 2017 and lasting until January 1st, 2022, the exclusion applies to federal loan plans such as:

While this will not affect the tax status of student loan benefit such as those offered by student loan genius, California’s bill is a big step in the right direction, helping those crushed by student loan debt.

If you’re a California resident, reach out to your local representative to learn more about Assembly Bill No. 461 – Chapter 525.

If you’ve got questions we can help with, please contact us.

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Structure For Success: Set Student Loan Repayment On Seniority

Tiered student loan repayment plans are a great way to reward your best employees over time. With Vault, employers are in the driver’s seat.

It reveals the continued trend of ever increasing cost of college education. Forbes recently reported that student debt has now become the second highest consumer debt category after mortgage loans. As students come out of college and seek employment, finding the right job that can help reduce this burden becomes crucial.

The Vault portal is a breeze to set up and implement by HR’s needs. Employers can choose to reward senior employees with a full monthly loan repayment amount, but also incrementally reward newer employees over time.

The average employee stays with a company just two years, which creates a revolving door for recruiting teams. It’s been proven that employees who remain past four years are more likely to make it for the long term, helping HR and recruiting.

Companies can structure their payments however they see fit, with some opting for a plan similar to offering varying dollar amounts based on tenure.

Whatever your company wants to do, Vault can help. If you’ve got any questions, contact us.

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Student Loan Repayments And Taxes

Student loan benefits are becoming the premiere perk a company can offer and for good reason: Employees stay with their company longer, which increases retention, and HR directors are able to bring in more capable talent.

But, as companies dive into student loan repayments, one question seems to go unasked: Who pays the taxes?

Because student loan repayment is a newer benefit, there’s ambiguity around who pays the tax. With Vault, a company has three options, assuming an employee receives a contribution of $100 per month:

Whatever tax option you choose, the smallest extra payment towards a student loan makes a difference in your employee’s lives.

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