401(k) Match for Student Loans: New Benefit Explained

The SECURE Act 2.0 introduced a valuable benefit for student loan borrowers last year. Under section 110, employers can now match student loan payments with 401(k) contributions, helping employees save for retirement while paying off educational debt.

Why It Matters

Many people struggle with paying down student loans and building retirement savings. When the average student borrows over $30,000 and takes up to 20 years to pay it off, saving for retirement on top of student loan payments can feel impossible.

With the SECURE Act 2.0, employees can address both financial goals simultaneously, setting them up for more stable financial futures.

How It Works

Participating employers match qualified student loan payments, which is any amount you personally pay toward your student loans.

Here’s the process:

1. You make a qualified student loan payment
2. You provide proof of the payment to your employer, either monthly or annually
3. Your employer contributes the same amount you paid toward your loans to your 401(k)

For example, a $500 loan payment would result in a $500 employer contribution to your 401(k), no employee retirement contribution necessary.

Taking advantage of this benefit could mean thousands added to your retirement savings annually while you focus on paying down student loan debt.

Eligibility

All student loans are eligible under section 110:

• Federal student loans
• Private student loans
• Loans for qualified education expenses (such as tuition, fees, and books)

Most retirement savings plans are included as well:

• 401(k) plans
• 403(b) plans
• 457(b) plans
• SIMPLE IRA plans

Companies can choose whether to offer this benefit. Some large employers, like Verizon, Walgreens, and Chipotle, already provide it.

Who It Helps

This new rule can significantly improve employee financial situations by allowing them to build retirement savings while managing student loan debt - a powerful tool for long-term financial health.

Employers also benefit through tax deductions for these contributions, making this offering attractive to employers and employees alike.

Next Steps

Check to see whether your employer offers this benefit. If so, you’re in luck!

1. Make sure you understand the terms of the benefit
2. Calculate how it could increase your retirement savings
3. Weigh whether using it is the right option for you

If your employer doesn’t yet offer student loan 401(k) matching, here are some next steps:

1. Ask HR about plans to implement the benefit
2. Make a case for adding student loan matching (check out our step-by-step guide on how to ask your employer for a student loan repayment benefit)

Paidly makes taking advantage of this benefit simple for employers and employees. Talk to an expert today to learn more.

Every contribution counts when boosting your retirement savings and tackling student debt. Don't miss this opportunity to secure a better financial future.