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making employees aware of what's available and what solutions
are best for their unique needs, " Zlatar says.
Akhil Nigam, managing director for Fidelity Labs, Fidelity
Investments in Boston, says his company is also developing
student debt solutions to focus on simplifying the complexities
behind repayment.
Fidelity Labs set out on a mission to revamp existing
solutions last year in response to a customer survey of its
parent company's workplace retirement plans, Nigam says.
The study found that 80% of participants said student loans
affect their ability to save for retirement. Moreover, twothirds
had stopped or reduced plan contributions because
of student loans. The same percentage had resorted to
borrowing against their retirement plan or to taking a hardship
withdrawal to cover their debt. This debt burden was
present among employees of all ages.
" The federal government allows for many different ways
to repay your loans, " Nigam says. " But each of these repayment
options can be difficult for the average consumer to
understand in terms of eligibility requirements, how to
apply and how each [option] can help. "
The repayment process can be further complicated by
the fact that many student borrowers end up taking two or
more different types of loans. Each type can vary significantly
depending on interest rates, repayment options, and
opportunities for consolidation and forgiveness, he says.
What is startling, though, is that many borrowers sign off
on these loans without learning even the basics about them.
According to a recent Prudential survey, 25% of current
students do not know whether their loan is a federal or a
private loan.
Therefore, to ease the process, Nigam says, Fidelity's
debt management tool aggregates an employee's student
loans into a single interface where he can compare loan
details and develop a payment strategy. Employees also
have access to calculators and other tools whereby they can
factor in personal details such as income level and savings
to the payback equation.
Student Loans and the Bigger Picture
Many providers agree that educational resources and interactive
tools are inadequate to help employees truly achieve
financial wellness. Zlater says that by using Prudential's
loan advisory platform alone, employees can save up to a
few hundred dollars a month, which they can then redirect
to meet other financial needs such as building an emergency
fund and saving for retirement, but some employees
must be motivated to do so.
Thus, she advises encouraging employees to view
student-loan repayment as a step in a holistic approach to
achieving financial wellness. " We talk to employers about
what they need in order to enable their employees to learn
and adopt the behavior that will help them manage day-today
finances, save and invest effectively, and protect against
financial risks such as unexpected illness or loss of income. "
Brian Hamilton, vice president of SmartDollar, in Nashville,
Tennessee agrees that simple, step-by-step guidance
and behavioral change are paramount to any financial
wellness program. SmartDollar starts with encouraging
employees to build a budget and emergency savings.
" Studies show that almost 49% of Americans can't cover a
$400 emergency without borrowing money, " Hamilton says.
" So we want employees to set aside some money first so they
can stop borrowing each time they need something. "
The program then guides employees to tackle their
consumer debt, including student loans, by making
minimum payments on each, but devoting the most energy
to the smaller debts. " We go from the smallest balance to
largest because when you pay off the smallest one, you
get that quick win. And any time you want to modify your
behavior, you want to see the quick win so you keep going. "
Prudential concluded in a recent student debt study that
the takeaway message " [is] not that students and their families
should never borrow to pay for college. Rather, it is that
by borrowing from an informed position, taking advantage
of other sources of funding, and managing their finances
carefully, students can minimize the burden of student loan
debt after graduation and improve their financial wellness. "
The same study found that 56% of borrowers paying off
student loans said they would have applied for more scholarships
and grants had they foreseen the financial burden
they face now. Moreover, 44% said they would have saved
more, and 34% said they would have worked more while in
school.
" We hear a lot of people say that, had they known what
they know right now, they might have made different
choices. So many of them simply didn't know what they
were getting themselves into, " Nigam says.
Still, while some employers may hesitate to invest in a
student-debt reduction initiative, the move could secure an
employer's ability to attract and retain top talent. According
to the ASA survey, " Seventy-six percent of respondents said
that, all other things being equal, if an employer offered
assistance with student loan repayment, it would be the
deciding factor or have considerable impact on their choice
to take that job. "
A recent study by Prudential Retirement found that
graduates carrying college loans say employer assistance
with repaying them is as important to their job selection as
the availability of health insurance. -Javier Simon
KEY TAKEAWAYS
* Financial wellness programs addressing student loan
repayment offer options such as debt consolidation,
assessment of loan forgiveness, means for debt reduction
and other refinancing options.
* Advisers can show potential borrowers how to
finance college from an informed position-such as
by including other funding sources-thereby lessening
the burden of student loan debt later.
planadviser.com september-october 2017 | 69
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PLANADVISER - September/October 2017

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