Fidelity Expands Student Debt Help for Its Staff

Some 40 million Americans with federal student loans face the return of required monthly payments and interest accrual starting Jan. 31.

An analysis of loans from Fidelity Investments' Student Debt Tool shows Gen Z joining the ranks of workers increasingly burdened by debt, while baby boomers hold more than twice as much debt as these younger borrowers.

Fidelity announced Wednesday that it will expand eligibility and increase by 50% the lifetime maximum loan payment offered to its own associates who are paying down student debt, effective in December.

"We expect more than 5,000 Fidelity associates may benefit from this competitive program, which includes a waived waiting period to become eligible so new hires can enroll on day one, and a $15,000 lifetime maximum payment," Tom Vogel, head of financial benefits for Fidelity Investments, said in a statement.

Besides relieving the financial and emotional pressure on those with student debt, analysis of new data from early adopters of the Student Debt Benefits Program for Fidelity's plan sponsor clients shows a 78% decrease in turnover among employees with student loans, demonstrating the power of student loan assistance to attract and retain top talent.

"It's clear that student loan borrowers are juggling multiple priorities above and beyond paying down their debt," Jesse Moore, head of Fidelity Investments' student debt program for workplace investing, said in the statement.

The National Conversation

As student debt gains attention at the national level, proposed legislation such as the Secure Act 2.0 could give additional support to student debt borrowers, according to Fidelity.

This legislation would allow employers to contribute to workers' retirement accounts in the amount they are paying toward their student loans.

Fidelity's analysis found that those with student loan debt are more likely to withhold retirement contributions or take out a loan against their 401(k), which can significantly affect their ability to retire comfortably.

This finding was derived from some 60,000 Fidelity tool users with more than 210,000 loans, representing more than 6,000 companies, as of Sept. 30.

As Gen Z and millennials continue to be weighed down by debt from recent undergraduate and graduate programs, boomers are the most heavily burdened generation when it comes to average monthly payments, total balances and interest rates, according to data from Fidelity's Student Debt Tool.

Boomers owe $58,300 on average with monthly payments of $620, compared with Gen Z's $27,900 and monthly payments of $480.

Fidelity said this is likely due to a combination of factors: career changes that require additional education, as well as loans taken out to finance a child or grandchild's education, which often carry higher interest rates.

What Borrowers Should Do Now

Fidelity suggested several steps borrowers can take to ensure a smooth transition as they prepare for the end of the repayment pause.

First, review the budget to ensure that payments will fit back into monthly spending. Fidelity's Student Debt Tool shows that borrowers pay an average of $515 per month against their loans, so borrowers will want to avoid any surprises when repayments resume.

Second, confirm that the loan service provider has current personal and financial information, especially if automatic payments were used in the past.

Third, review the financial plan to see how student debt fits into overall goals. Balancing student debt payments with saving and investing for the long term can be daunting, so it's important to take the time to make sure the right repayment strategy is in place.