How the 401(k) match for student loan repayment works and who's eligible

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• Employers can now match your student loan payments with contributions to your retirement plan.
• The arrangement was made possible by a law called the Secure 2.0 Act.
• It may not be the best option for you, especially if you plan to leave your current place of employment in the next few years.

Paying down your student loan debt can now help you simultaneously boost your retirement savings under new rules allowing employers to treat student loan payments as qualifying contributions toward retirement plans.

A provision that took effect this year in a law known as the Secure 2.0 Act gives employers the option to make matching contributions to 401(k) , 403(b)s, and other qualifying retirement accounts that are tied to employees' student loan program.

The benefit is not mandatory. But if your employer offers it, the loan payments are to be treated using the same formula as contributions from your paycheck would be. For example, if your employer's policy is to match your 401(k) paycheck contribution dollar-for-dollar up the first 5% of your salary, the same would apply to the loan-payment match.

"Student loan debt can be a significant drain on household income, shifting resources away from basic necessities, retirement savings , and other goals such as purchasing a home," says Teresa Greenip, CFP and wealth manager at Aspiriant . "Eliminating student loan debt can benefit the economy by shifting household resources from debt repayment to investment and spending, as well as increased personal productivity."

Here's what you need to know about the Secure 2.0 student loan match program in 2024.

Student loan match program offers debt relief to borrows

Saving money and eliminating debt are essential building blocks of long-term wealth-building for most individuals in the US. But workers are largely drowning under ballooning interest rates, education costs, and inflation over the last few years. The student loan payment match program can benefit employees actively paying down student loan debt.

Studies from the Federal Reserve suggest that over $1.6 trillion in student loan debt is affecting millions of borrowers, with 40% missing their October 2023 payment . The average monthly student loan payment is around $503, according to the Education Data Initiative .

The new student loan payment match program has the potential to relieve a lot of that pressure. Under this program, businesses can now start offering their employees with eligible 401(ks), 403(b) , 457, or SIMPLE IRA a matched contribution, up to a certain percent, when they make a qualifying student loan payment.

Note: Student loan match program rules require matching contributions to have the same match percentage, eligibility, and vesting rules. However, the frequency of match payments can differ. Since vesting rules remain the same as other 401(k) match contributions , employees will be further incentivized to stay with their current employer for at least three to five years.

Rather than depositing a portion of your paycheck in your 401(k) to max out your employer match (which is essentially free money), you'll get the same employer match benefit when you make a qualifying loan payment.

Is the student loan match program worth it?

The new student loan match program certainly can put employees in a better situation to start paying down student loan debt. But that may be all it's cracked up to be.

Match contributions from an employer have vesting requirements, which can take up to five years, depending on the plan. If you leave your current place of employment — or get laid off before your money is fully vested — you'll lose some or all of the non-vested money from your employer. So, if the only money in your account is from employer-match contributions, you run the risk of having no retirement savings.

A number of kinks still need to be worked out, as third-party administrators and plan sponsors struggle under the general lack of guidance from the IRS.

One concern plan sponsors have is authenticating employees' student loan payments.

"Employee deferrals to retirement plans are administered by employers themselves, so it's relatively easy to track contributions," Greenip explains. "Since employers do not track student loan repayments, this adds a layer of complexity and administrative support that will be needed to offer the benefit."

Note: Employer match contributions resulting from the student loan payment program still count toward annual contribution limits. In 2024, the maximum 401(k) contribution limit is $22,500 for people under 50. People 50 or older can contribute an additional $7,500.

How to get a 401(k) match for your student loan payment

Investing platforms and third-party administrators have already begun adding student loan matches to existing employer-sponsored retirement plans. For example, Betterment launched a student loan 401(k) match benefit to its automated 401(k) plan, Betterment at Work.

Other platforms offering this new benefit include Fidelity Brokerage, Highway , and BenefitEd .

"We know that student debt can be a major impediment to saving for retirement," says Sarah Levy, CEO of Betterment . "Our industry-first student loan 401(k) matching solution is a completing addition to our modern 401(k) that will help to broaden plan participation to those whose student debt previously kept them from saving for retirement."

Any employer offering a 401(k), 403(b) 457, or SIMPLE IRA is eligible to offer a student loan match as an employee benefit. Consider reaching out to your employer to inform them of this new opportunity. It could be as easy as sending an email.

Retirement Planning

The best robo advisors can help you start your retirement planning journey. Institutions like Robinhood and SoFi investing often offer an IRA match to help your savings grow.

Secure 2.0 student loan match program — Frequently asked questions (FAQs)

What is the Secure 2.0 Act student loan match?

The Secure 2.0 Act student loan match is a program implemented in 2024 that allows employers to make matching contributions to their employees' retirement plans after they make a qualifying student loan payment. This program is one of many provisions implemented by Secure 2.0 to help Americans prepare for retirement.

How does Secure 2.0 affect employees?

One of the major ways Secure 2.0 is affecting employees is through the new student loan payment match program. This program allows US workers to pay off student loans while still earning employer-match contributions in a taxable retirement plan.

Will student loans get a 401(k) match in 2024?

Yes. In 2024, employers can match your student loan payments with contributions to your 401(k) or similar retirement plan. Employer matches for qualifying student loan payments are required to offer the same percentage, eligibility, and vesting rules as standard employer matches.

Can an employer pay off an employee's student loan?

Yes. Employers are able to pay up to $5,250 per year of an employee's student loan through the CARES Act. Similarly, your employers can offer a student loan match benefit, which allows employees to earn a matching contribution to a qualifying retirement savings plan after they make a qualified student loan payment.