The best time to start saving for retirement is as soon as possible. By saving in your early 20s, you give your nest egg extra time to grow, potentially shaving years off how long you need to work.
But before setting aside money for retirement, most feel the need to retire student loan debt. That's easy to say but harder to do for millennials exiting college these days. Many are in the same boat as Nolan Grace, a 24-year-old who graduated from Purdue University with "very significant" loans. "It's the biggest weight on my life right now," he says.
Luckily, Grace works for an employer — Austin-based software-services company BP3 Global Inc. — that helps him with loan payments in an increasingly popular way. BP3 uses a platform called Student Loan Genius to let it match as much as $100 per month in Grace's debt payments, one of several companies offering similar benefits. Employees who work for Student Loan Genius customers have more than $61,000 in student loan debt on average, and their monthly payments are usually more than $500 a month.
"We really like the effect it has on our ability to recruit," BP3 Chief Executive Officer Scott Francis says. He explains that the benefit tends to get much more attention from college students than the company's health care and retirement offerings. And on Wednesday, Student Loan Genius is unveiling a novel product that may attract even more debt-laden graduates.
CEO Tony Aguilar helped start Student Loan Genius in 2013, building up its customer base to include 45 companies. He's been pushing for Congress to pass a bill that would allow employer matches to student loan payments to be pretax. But in the meantime, his company came up with a way to sync the existing 401(k) program with college loan bills. That way, young people don't lose the opportunity for a tax-deferred match if they've chosen to pay down debt rather than save for retirement.
"Not only are we helping the student loan problem, we're helping people save as well," he says.
Aguilar, 31, graduated from college with more than $100,000 in student loans. He says he knows as well as anyone how the problem is holding back an entire generation. What's more, helping millennials pay down student debt would have the added benefit of stabilizing, and fueling, the economy, he contends.
More millennials than ever face a barrier to saving. U.S. educational debt rose to $1.2 trillion last year, six times more than in 2003, and the average recent college student has $31,000 in debt. These statistics put at risk the retirement prospects for millions of Americans, according to the Center for Retirement Research at Boston College. In a study last month, the center estimated that recent growth in student debt could increase the number of Americans facing inadequate retirement income by 4.6 percentage points. Such higher debt loads make it harder to buy a home or contribute to retirement plans.
