Student Loan Refinancing: The Next 401(k)?
There are 3 reasons I believe student loan refinancing will be one of the largest workplace benefits since the 401(k):
- Most new graduates carry debt: Nearly 71 percent of new graduatesfrom undergraduate are carrying student loan debt. While all other types of consumer debt have decreased since the 2008 recession, the total amount of student loan debt has jumped by 84 percent.
- Graduate students carry even more: According to an analysis from theFederal Education Budget Project at the New America Foundation, 40 percent of the total student loan debt is carried by graduate students. At Earnest, we see student loan debts for some medical students as high as$500,000.
- They are burdened with monthly payments: Interest rates on federal loans can range from 4.29 to 6.84 percent, and private loans can be higher, ranging from 5.75 to 11.85 percent. The result is monthly payments from square one. Refinancing can help lower APR, and at Earnest the average savings for a client who refinances their student loans is $17,936.
Several companies have already set precedents for helping employees deal with increasing levels of student debt. In return, they aim for talented recruits and less employee turnover.