Key takeaways

  1. The Secure 2.0 Act contains a provision allowing employers to count employees' qualifying student loan payments as contributions towards their retirement plans, with the potential for an employer match
  2. To qualify, borrowers need to have an eligible employer-sponsored retirement plan and be making payments on a "qualifying education loan"
  3. Recent grads with the lowest incomes and highest amount of debt may benefit the most from this program
  4. Without exceeding annual contribution limits, employees can receive an employer match without contributing to their retirement account
  5. To take advantage of this program, ask your employee benefits department if they plan on offering it in 2024

Student loan payments resumed in October for over 40 million Americans. With the added pressure of an extra monthly bill, 84% of borrowers say that student loans negatively impact their ability to save for retirement. Luckily, they may soon catch a break from their employers.

The Secure 2.0 Act contains a provision allowing employers to count employees’ qualifying student loan payments as contributions toward their retirement plans so that they can receive an employer match.

The first qualification requirement is you must have an employer that matches 401(k), 403(b), 457, or SIMPLE IRA contributions and is willing to participate in the program.

According to the provision, the employee’s student loan payments will count as contributions, meaning they can receive their employer match without having to add a penny into their retirement account. 

Who will benefit the most? Most likely recent grads with the lowest incomes and a lot of debt, but everyone who qualifies will benefit at least nominally.

Here’s everything you need to know about the employer match for student loan payments program.

How does student loan retirement matching work? 

The average retirement plan involves an employer matching a certain percentage of an employee’s contribution to their employer-sponsored retirement account. 

Here’s an example of how the new plan should work:

Say you contribute 8% of your annual salary into your 401(k) at work, and your company matches your contribution up to 5%. 

Now, suppose you are paying 5% of your salary toward student loans. In that case, the new law will give your employer the option to match your loan payment percentage in the form of a 401(k) matching contribution—all without you having to put anything into your retirement plan. So, if you make $100,000 a year, that equates to a maximum employer match of $5,000. 

Brilliant, right? Well, yes, but your employer doesn’t have to play ball; it’s an optional program. Even though matching student loan payments is now allowed on a federal level, your employer has to update their plan to make it possible (i.e., it isn’t automatic).

Moreover, like any new legislation, there are still some details to be ironed out. For example, it’s still a bit foggy whether private loans will qualify, and without any previous plans to compare to, there is no blueprint to help navigate potential pitfalls.

Until the new system is tested, employers remain cautiously optimistic about the prospects of a new add-on to their already robust employee benefit suites.

How do I get my student loan payments matched by my employer?

First and foremost, start by asking your employee benefits department if they plan on offering a student loan matching program in 2024. If they do plan to provide this benefit, it’s vital to understand the rules. Also, it couldn’t hurt to advocate for yourself and your colleagues who could benefit from this change. Who knows, you might become a hero to your co-workers!

Student loan payment matching rules

Here’s what you need to qualify for the program.

  1. You must have an eligible employer-sponsored retirement plan. This includes 401(k)s, 403(b)s, 457(b)s, and SIMPLE IRAs. 
  2. You have to be making payments on a “qualifying education loan.” This loan is used for educational expenses for you, a spouse, or a dependent.
  3. You have to “self-certify” your payments. The process is still a little murky, so stay tuned for updates.
  4. Your contribution must not exceed annual contribution limits for retirement plans. This stipulation presents a potential wrinkle for some. For example, if you are able to contribute enough to get your employer match without counting your student loans, you will save more this way in the long term.

But for everyone else, the student loan matching program should be a welcome benefit to help you start or continue saving for your future. 

As with any new legislation, more details will come as the plan unfolds. Keep an eye out for updates here.

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