New Boost for Student Loan Payments: 401(k) Matches

By: Nancy Bilyeau · January 10, 2024 · Reading Time: 3 minutes

Employers to Beef Up Retirement Accounts

As of January 1, 2024, employers will be able to aid workers’ payments on their student loans with a matching contribution to the individuals’ 401(k) plan.

In practice, it might look like this: If you pay $250 per month on your student loan, your employer would treat it as though you were contributing $250 to your retirement account, and be able to match the amount.

This change, part of the 2024 phase-in of the SECURE 2.0 Act , is intended to give people under financial strain additional retirement-funding options.

Have Student Loans Ruined Retirement Planning?

Some workers may put off contributing to retirement plans, such as 401(k)s because of other financial demands, like loan payments. People caught in a vortex of competing financial priorities often end up focusing on things that aren’t retirement, according to a Goldman Sachs study .

The new match rule is meant to help with that. According to the Senate bill, this section of SECURE 2.0 “is intended to assist employees who may not be able to save for retirement because they are overwhelmed with student debt, and thus are missing out on available matching contributions for retirement plans”.

The average federal student loan debt balance in the U.S. stood at $37,718 in autumn 2023, while the total average balance including private loan debt may be as high as $40,499.

Debt burdens lead to people delaying other financial plans or milestones, such as building up emergency savings, saving for a downpayment on a home, or addressing other debts.

How Does the New 401(k) Match Work?

Businesses are not required to offer this for their workers, but SECURE 2.0 encourages them to do so. If the option exists in your workplace, you would likely need to opt into a student-loan-matching plan. Employers can make student loan corresponding payments into 401(k), 403(b), and governmental 457(b) plans.

To receive the match, workers must annually certify to the employer what was paid on their student loans. The new rule allows employers to rely on the employee’s certification without substantiation. However, the Treasury Department is expected to issue guidelines on procedures for companies early this year.

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