Fixed Income Strategies

Betterment adds new student loan, 529 college savings features to its 401(k) business

Key Points
  • Employers who use Betterment's 401(k) plans will now have the option to add new student loan or 529 college savings features.
  • The additions will enable employees to track their debt paydown and education savings goals alongside their retirement plan.
  • The new features come as the pandemic has raised awareness of the importance of financial wellness in the workplace.
MoMo Productions

Today's workers are often tasked with juggling multiple financial goals.

Between saving for retirement, paying off student debt and planning for your own children's education, it can be difficult to know whether you are on track.

Betterment is taking steps to try to make it easier for employers to help workers manage those priorities with the addition of two new offerings focused on student loans and 529 college savings plans.

Betterment at Work, which provides 401(k) plans to employers that have between two and 1,000 employees, is adding new tools that companies can opt to provide alongside their 401(k) plans.

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The first is a student loan feature that will let workers access information on the various debts they may have through different providers in one location. Additionally, it will help them evaluate which balances to pay down first, see repayment projections and track their participation in student loan matching programs, if their employers offer them.

Student loan debt is "a barrier to entry to a 401(k) and to retirement savings in general," said Kristen Carlisle, general manager of Betterment at Work.

"People are focused on paying off loans and feel as if they can't take full advantage of other benefits that their employers are offering," she said.

Betterment is offering the student loan feature in partnership with a company named Spinwheel, which provides debt programs that can be embedded into apps or services.

People are not just looking at compensation as their base salary anymore.
Kristen Carlisle
general manager of Betterment at Work

Separately, Betterment is adding a 529 feature that will allow workers to see how investing tax-advantaged money toward these plans will shape up over time and in comparison with their other goals.

That addition comes as Betterment has entered into an agreement to acquire the partner and customer relationships of a company named Gradvisor, a provider of personalized college savings plans.

Employers may opt to take on the cost of the benefits or to share it among their employees.

Betterment's expanded platform comes as the pandemic has made financial wellness a challenge for many workers. At the same time, many employers are looking to expand their benefits in an effort to recruit and retain talent.

Workers looking for guaranteed retirement income
Workers looking for guaranteed retirement income

"People are not just looking at compensation as their base salary anymore," Carlisle said.

"People are really thinking about 'what are you offering me in terms of the other benefits that help me achieve my goals and manage my life?'" she said.

A survey conducted by PwC last year found 63% of employees have experienced greater financial stress since the pandemic began. Younger generations are feeling the brunt, with 72% of millennials, 68% of Gen Z and 62% of Gen X reporting higher levels of financial pressure, compared with 46% of baby boomers.

The survey also found 87% of employees want their employers to provide them with help with their personal finances.

Another survey conducted by TIAA found that just 22% of adults give themselves high scores — a 9 or 10 out of 10 — on financial wellness.

Meanwhile, 21% of respondents gave themselves the lowest scores — between 1 and 4 out of 10.

Those who are most likely to feel confident about their finances include men and wealthy, older and retired people.