Are Student Loan Retirement Matches the Next Big Thing for Benefits?

U.S. employers obtained a new tool earlier this year to support workers with student debt, as provisions in the SECURE 2.0 Act allow them to match employees’ qualified student loan payments with retirement contributions to a 401(K) plan — but the benefit has been slow to get off the ground.

While some large companies have taken advantage of the benefit — Verizon, Chipotle and Walgreens are among those with active programs; Abbott Labs provided a similar perk pre-SECURE 2.0 after receiving dispensation from the Internal Revenue Service (IRS) — many other organizations have hesitated to follow suit.

“A lot of the recordkeepers are still really getting their arms around how they’ll help their clients administer this,” said Jania Stout, the senior vice president of retirement and wealth at OneDigital. “[Many] HR and benefits teams are very overwhelmed already. So, to add another component that they have to track, they want to make sure the providers they’re with have a really good solution.”

Access bonus Workspan Daily Plus+ content on this subject:

An Overall Lack of Student Debt Benefits

According to Betsy Mayotte, the president and founder of the Institute of Student Loan Advisors, a larger piece of the picture may be the relative lack of any student debt-related benefits offered by most employers.

Among employers surveyed for WorldatWork’s 2024 Total Rewards Inventory of Programs & Practices, fewer than 20% offered student loan debt repayment assistance and/or related benefits (i.e., college scholarship for employees’ children, college savings plans, employee scholarships, student aid or loans, or college preparation planning).

There may be several reasons for that, Mayotte said, including the concern that it is difficult to use total rewards to address student debt “cheaply but robustly,” which she noted is not true of all programs.

Another misconception is related to worker age: “When people think of student loan debt, they think of young people in their early 20s, and that is so far from the truth,” Mayotte said.

Instead, she explained, a significant portion of student loan borrowers are over the age of 30, and the 60-and-older age group is the fastest-growing population to carry student debt.

“That’s a big part of why we’ve seen a slow start on this,” Mayotte said. “Companies don’t realize as many people in their shops worry about student debt as they do.”

The Impact of Student Debt on Workers

After federal student loan payments were restarted in October 2023 following a three-year pause during the COVID-19 pandemic, almost a quarter of borrowers said they would need to reduce their retirement contributions to make loan payments, and 29% said they would need to reduce their emergency savings, according to a Corebridge Financial poll. Concerns were higher for individuals making under $50,000 — 77% said payments would affect their retirement savings.

The impacts on employment are significant: Workers who called their debt a “heavy burden” were 2.4 times more likely to be in the process of leaving their current employer, with 64% of workers who carry more than $150,000 in student debt saying they are on their way out of their current jobs, according to an ADP Research Institute report.

By contrast, Fidelity Workplace reported employers that offer a student debt repayment plan saw a 78% reduction in overall turnover, and 86% of younger workers said they would stay with their employer for five years if they received help paying off student loans.

Matching Offers a Unique Benefit

In some cases, retirement matching isn’t a fit for a particular workforce — for instance, if the majority of an organization’s employees are already enrolled in and contributing to a retirement plan, said Craig Copeland, the director of wealth benefits research at the Employee Benefit Research Institute (EBRI).

But if employee surveying indicates a match would be beneficial for a number of workers, the benefit is worth exploring, he said. It can be a useful attraction-and-retention tool, and it may eliminate significant employee stress — a boon for employers, as workers’ mental health issues cost the U.S. $48 billion each year in productivity.

“On top of retention, that’s an additional benefit — improved productivity rather than the person worrying about how to pay their bills,” Copeland said. “Particularly for people getting their first job, being able to say, ‘We have something to help with your student loans,’ is a big deal.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics: