Employers Can Now Match Student Loan Payments With 401(k) Contributions

A Note From Patricia:

Hello and welcome to Forbes Advisor’s Weekly Brief, where each week we dive into the realities of consumer finance and empower you with the knowledge to help make your financial journey easier.?

Saving for retirement might seem impossible if you carry the burden of student loans, which make up a whopping $1.77 trillion of Americans’ debt. The average American borrows $37,000 in federal student loan debt—and over $50,000 if they borrowed private loans. To put these numbers into perspective, the nationwide median down payment on a house is $30,000.?

The burden of student loan debt looms large and poses a significant obstacle to retirement savings. A September 2023 study from the Achieve Center for Consumer Insights found that 30% of respondents had not saved for retirement due to their student loan debt.?

Soon, some Americans won’t have to choose between paying off their student loans or saving for retirement. Starting this year, under the Secure Act 2.0, businesses can match those loan payments with contributions to the workers’ retirement plans. This could kick start some folks’ retirement funds who otherwise wouldn’t be able to afford to save.?

This week, we’ll discuss how your employer can help you repay your loans.?

We’d love to hear your thoughts or experiences in the comments section below. Have a wonderful day and hope to hear from you soon.

Sincerely,

Patricia Louis

Editor, Forbes Advisor

How Your Employer Can Help You Save For Retirement While You Pay Down Student Loan Debt

The Secure Act 2.0 seeks to combat the retirement savings gap for student loan borrowers. One of the most notable provisions allows workers to have their student loan payments matched by their employers in retirement savings.

For example, say you’re earning $60,000 annually and are eligible for a 10% employer contribution match to your 401(k) if you contribute $500 monthly to your retirement savings. However, you have a $500 monthly student loan payment, and you can’t afford both, so you opt to skip your monthly 401(k) contribution. Under the Secure Act 2.0, your employer can still make a matching contribution of up to $500 a month into your retirement account, even if you’re not contributing and are paying your student loans instead. Employers can match these contributions up to $5,250 tax-free.

To qualify for the match, you must have made a student loan payment toward a debt you incurred for your own qualified higher education expenses, including tuition, fees and room and board. Your employer may require that you verify how much you have paid in qualifying student loan payments every year.?

This new section of the law applies to retirement plan contributions starting in 2024. If you’re a job seeker with student loans, consider asking your prospective employer about this retirement plan match. If you're currently employed, consider asking your employer or human resources representative to see if they offer it.?

To learn more about the Secure Act 2.0 and how your employer can help take the student loan debt burden off your shoulders, read more here.

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