Updated: Dec 27, 2022
The average cost of a college education is increasing at a rate higher than inflation.
In the United States, the average cost of a college education is increasing at a rate higher than inflation - even in the current economic environment. Today, the total cost of tuition, fees, and room and board at a four-year private institution is over $200,000. While the cost of in-state public universities is lower, the nearly $100,000 average cost over four years is a tremendous financial burden for most Americans. By 2037, the cost of four-year public and private colleges is expected to be more than double what it is today.
Over the past two decades, the gap between the cost of higher education and the ability to pay for it has widened.
Over the past two decades, the gap between the cost of higher education and the ability to pay for it has widened creating a greater financial challenge for American families. In fact, one of the greatest drivers of financial stress on Americans is saving and paying for their children’s education with fifty-five percent of employees surveyed reporting it as a top household concern.
The impact of this financial stress is felt by employers and employees in a variety of ways. According to Forbes, eighty percent of employers report that financial stress is lowering their employees’ performance levels, and it’s costing them half a trillion dollars annually. In addition to lower performance, financial stress creates an inability to focus at work, higher absenteeism, lower morale, and poor health that impacts the cost of medical insurance premiums.
In its 2022 Employee Financial Wellness Survey, PwC reports that financially stressed employees are more likely to be looking for a new job and twice as likely to seek an employer who demonstrates care about their financial well-being.
529 plans are the right employee benefit
With saving and paying for education a leading cause of financial stress on their employees that adversely impacts profitability and retention, employers are seeking a solution. Fortunately, a solution exists in the form of 529 Education Savings Plans. 529 plans are the best way to save for education at all levels (e.g., K-12, college, graduate schools, and apprenticeships). Assets can grow-tax free provided the money is used for qualified education expenses or student loan debt payments. Most states provide a tax deduction or credit for contributions to a 529 plan, and seven states give employers a tax benefit for contributions to their employees’ accounts.
Despite the solution provided by 529 plans, their volume and complexity have made it almost impossible for employers to offer them as an employee benefit. Unlike a 401(k) plan with its limited menu of investment options and professional support for employees, there are more than one hundred 529 plans on the market and thousands of investment options to choose from. Each 529 plan has a different expense ratio, and the states that sponsor them offer different tax incentives as an enticement for investment.
Edusave, however, has developed a platform that addresses these complexities. The unique Edusave technology recommends a 529 plan and investment option for each employee based on their individual circumstances. Edusave helps employees set their savings goals, get enrolled in a plan, make regular contributions, and manage their accounts via a mobile app.
Employers who offer 529 plans as an employee benefit will show they care about their employees’ financial well-being and help them stretch their money further. In the process, they will attract and retain top talent and create a more engaged and productive team of employees that will grow the bottom line. At a time when financial wellness is top-of mind in the workplace, 529 plans are the right employee benefit.
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