Employers Can Now Offer a 401(k) Match on Student Loan Payments

Legislation that went into effect this year makes student loan payments eligible for a 401(k) match if your company participates.

Nick Wolny Managing Editor

A classically trained French hornist by education, Nick Wolny is a managing editor and journalist at CNET, where he oversees coverage related to consumer spending, consumer tech and personal finance. He is also the finance columnist for Out magazine and a frequent television correspondent. Prior to journalism, Nick owned a content marketing agency, a business he converted into a fractional consultancy upon pivoting his career, and has previously written thought leadership columns for Fast Company, Insider, Entrepreneur Magazine and Fortune. A rural Illinois boy at heart, he's now based in Los Angeles.

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Nick Wolny

Feb. 2, 2024 2:28 p.m. PT

2 min read

A new law that took effect this year may help some of the 44 million student loan borrowers make progress toward their financial goals.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, passed in December 2022, aims to stimulate retirement savings by giving companies the option of making their 401(k) match more flexible. If an employer opts in, it can count an employee's student loan payment as a 401(k) contribution, even if the employee chooses not to contribute to their 401(k) themselves. Section 110 of the act says the benefit applies to "qualified student loan payments," which it defines as "any indebtedness incurred by the employee solely to pay qualified higher education expenses."

Employers recently adopting the benefit include Chipotle and engineering consultancy Kimley-Horn. Abbott Laboratories first piloted the concept with its Freedom 2 Save program in 2018, but it had an IRS exception to do so. It may take time for employers to implement. Other companies, like Adidas, are offering student loan payment stipends in their benefits plans in an effort to attract talent.

The legislation highlights the financial challenges often faced by college-educated workers at the outset of their careers. The cost of college has skyrocketed, having more than doubled in the 21st century alone, according to the Education Data Initiative, a nonprofit think tank.

Still, college graduates continue to out-earn their peers. Men with a bachelor's degree pull in an extra $900,000 in lifetime earnings and women pull in $630,000, according to research from the Social Security Administration. The earning potential is even higher for people who have graduate degrees: $1.5 million and $1.1 million in additional lifetime earnings, respectively.

Federal student loan payments are top of mind for many borrowers since repayment resumed last October after a pandemic-induced pause of three and a half years. Some workers prioritize paying down loans over contributing to retirement plans, a decision that leaves their most valuable years in the form of compounding interest on the table.

If you're struggling to pay your student loans, look into the SAVE Plan, which the Biden administration announced last fall in an effort to assist borrowers. It effectively halves the minimum monthly required payment on federal loans once you've enrolled. Also consider reaching out to your student loan servicer for other options.

Consider making debt reduction a priority for 2024. As inflation cools, interest rates on savings accounts and CDs are expected to eventually fall as well, and financial experts are recommending debt pay-down over long-term savings this year.