I'd rather have student loan aid than a 401(k)

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I'd rather have student loan aid than a 401(k)

It’s a competitive job market out there, and while job seekers look for the best places to work, employers are just as eager to snag the best young talent.

How? By stacking up workplace benefits.

Sure, you have your typical health and dental insurance, and maybe matching 401(k) funds. Then there are things like snacks, unlimited vacations, and slides. But why go through all that trouble when you can just help them pay off their student loans?

While 80% of young workers say they want to work at a company that offers some form of student loan aid as a benefit, only 3% of companies actually offer it. And of those three percent, each company does it a little differently. Natixis Global Assett Management, for example, will give you $5,000 for your student loans after working there for five years, with an additional $1,000 for five years thereafter. PricewaterhouseCoopers, on the other hand, is going to start offering $100 per month for up to six years, for a total benefit of $7,200 (because of reduced interest, they estimate the true value to be around $10,000).

In reality, the true value isn't really about the money you're getting from your employer or reducing your monthly payment. Instead, it's about reducing the amount of time you're going to spend paying this student loan. Take Amanda Danner, an analyst for Fidelity recently interviewed by the New York Times. Fidelity's student loan aid program, made public last month, gives employees up to $2,000 annually and will cut Danner's student loan repayment period from twelve years to eight.

Massive amounts of student loans combined with the 2008 recession have convinced many millennials to postpone traditional financial milestones, such as buying a house, getting married, and having children. For Danner, it was hard to even imagine buying a home or having kids when faced with her overwhelming loan payment -- she graduated with $85,000 in loans, twice the national average. She's not the only one. According to a 2015 Bankrate survey, 56% of Americans between the ages of 18 and 29 have put off a major life event because of their student loan debt.

Student loan debt is so paralyzing that 49% of young workers would prefer to work at company that offers a student loan aid program than a company that offers a 401(k) retirement plan. I'm in the same boat for a pretty simple reason: the psychological benefit of reducing the burden of student loan payments, which, for most people, last ten years or more, is much more gratifying than receiving a match on retirement savings.

Don't get me wrong: retirement savings are important, too. Millennials already understand that. On average, we've started saving for retirement earlier than any other generation. But at the same time, our definition of retirement is changing. We plan to retire later than the traditional "age 65" rule, which gives us more time to save, and we plan to work during our retirement, at least part-time. In general, we can afford to focus on the short-term gain of lowering our monthly student payment and shortening the repayment period in lieu of long-term savings. (Plus, it's not like the student loan aid wouldn't help us save for retirement, too – millennials don't spend all their money on just Uber and artisanal cheese, after all.)

Obviously, I'd much rather have a company that offers both a retirement plan and student loan aid. But if I had to choose one, I'd have to choose student loan aid. The fact that 49% of my peers agree with me shows how big of an opportunity there is for the 97% of employers who don't currently offer student loan aid to differentiate themselves from their competitors.

The biggest hurdle for both employers looking to offer student loan aid and employees wishing to take advantage of it is that there are no federal tax benefits to these programs, which means that both employees and employers owe taxes on these contributions. One bill introduced to Congress, the Student Loan Repayment Assistance Act of 2015, would make employer contributions to student loan payments tax-free. Unfortunately, it hasn't moved very far along the process, and GovTrack.us gives it a 1% chance of being enacted.

Bigger companies looking to stay competitive in the job market -- like their compatriots Fidelity and PricewaterhouseCoopers -- will likely begin to offer student loan aid regardless of the tax consequences. But making contributions tax-free is a key part of helping smaller companies offer this employee benefit. If you want to push your employer to offer a student loan aid benefit, 1) anonymously email this article to your HR rep and 2) call your congressperson and tell them to advocate for this bill.

In the meantime, if you're having trouble paying your student loans or are just looking to control your payments in a different way, you have options. If you have federal student loans, you should look into the government's repayment plans, some of which are flexible to fit your specific income. If you have private student loans, look into a student loan refinancing company such as Earnest to lower your interest rate.

Image: Tim Gouw