Many employees – especially younger talent – face a harsh financial Catch-22: pay off student loans or contribute to their 401(k)?
With limited dollars each month, paying down debt often means not contributing to a retirement plan. And if they don’t contribute, they miss out on your company’s matching contributions – essentially leaving “free money” on the table. In fact, one study found one in four employees misses out on some or all of their 401(k) match, sacrificing an average of $1,336 in employer contributions each year (reuters.com).
Nationwide, that adds up to over $24 billion in unclaimed matches annually. This gap hits younger and lower-paid workers hardest (those most likely to have student debt).
The result?
A huge segment of your workforce isn’t getting the full value of the 401(k) benefit you offer – through no fault of their own. It’s a lose-lose situation for employees and employers alike.
The scope of the issue is alarming. Outstanding student loan debt in the U.S. now exceeds $1.77 trillion, owed by roughly 42.7 million Americans (educationdata.org). That burden directly hinders retirement readiness: roughly 60% of adults who’ve had student loans have delayed important financial moves because of that debt (bankrate.com) – and 26% specifically say they’ve put off saving for retirement due to student loans. Entire generations are falling behind.
An estimated two-thirds of working Millennials have nothing saved for retirement (johnhancock.com), often because their budgets are consumed by debt payments instead of 401(k) contributions.
Gen Z is on a similar trajectory: 74% of Gen Z borrowers and 68% of Millennial borrowers report delaying key financial decisions like 401(k) contributions, homebuying, or emergency savings because of student loans. In other words, a huge portion of early-career employees simply cannot afford to contribute to their retirement plan – and thus miss out entirely on employer matching contributions. For HR leaders, this means your 401(k) benefit isn’t reaching the very employees who may need it most. It’s as if your plan’s value is cut in half – the company is offering a match, but many workers can’t ever receive it.
Imagine if your employees didn’t have to choose between paying down debt and saving for retirement. That’s exactly the promise of 401(k) student loan matching, a new benefit enabled by the SECURE 2.0 Act of 2022. Section 110 of SECURE 2.0 allows employers to treat an employee’s qualified student loan payments as if they were 401(k) contributions for the purpose of the company match (loancertify.com).
In simple terms: when an employee pays their student loan, your company can contribute to their 401(k) – just as you would if they had contributed that amount to the plan. This effectively ends the “either-or” tradeoff. Employees can reduce their debt and grow retirement savings at the same time, with help from your company’s match. For example, say your 401(k) plan matches 50% of contributions up to 6% of pay.
An employee earning $60,000 who directs 6% of her salary to student loans (about $3,600 a year) would be eligible for an $1,800 employer contribution to her 401(k) – even though she didn’t contribute to the 401(k) from her paycheck. By making her loan payments, she still receives that “free” retirement money she would have otherwise missed.
Lawmakers designed this provision to “help employees balance saving for retirement with paying off student loan debt,” avoiding the need to choose one financial priority over the other. It’s a true win-win that wasn’t possible before. This change took effect for plan years starting in 2024, and employers can now amend their 401(k) or 403(b) plans to add the student loan match feature. All the usual plan rules (eligibility, vesting, contribution limits, etc.) still apply, and importantly, if you offer it you must make it available to all employees eligible for the normal 401(k) match – you can’t pick and choose only those with loans.
Fairness is built in by design: employees without loans simply continue to get the regular match by contributing to the 401(k), while those with loans can get the match via loan payments – everyone has access to the same benefit.
The IRS has issued guidance to streamline administration: notably, employers can rely on simple employee self-certification of student loan payments to qualify for the match, rather than having to collect receipts for every payment. There’s also relief on nondiscrimination testing to ensure that offering this feature won’t accidentally skew your plan testing results if, say, mostly younger employees take advantage. In short, Congress and regulators have cleared a path to make this as easy as possible for employers to implement.
By leveraging this new tool, you can close the value gap in your 401(k) benefit. Employees who previously missed out on the match due to student debt can now receive those dollars in their retirement accounts – putting your benefit’s “missing half” back into their hands. They’ll chip away at debt and build retirement security, instead of sacrificing one for the other. For the first time, you can truly help employees tackle two financial goals at once.
As Jesse Moore, Head of Student Debt at Fidelity, put it: “The student debt retirement provision is exciting as it directly addresses retirement savings – one of the top areas we see so many borrowers forced to cut back on due to their student debt”.
By offering a student loan 401(k) match, you’re directly solving that problem. Your people no longer have to choose between their present and future finances – your benefit empowers them to do both.
It’s no surprise that the employees most burdened by student loans are the most enthusiastic about benefits to alleviate that burden. Millennials and Gen Z now dominate the early-career workforce, and these generations carry significant debt – but also a keen eye for employers who will help manage it. In fact, student loan assistance has become one of the most sought-after perks for younger talent. Consider these trends:
High demand for loan help: In one survey, 77% of employees (across generations) said they would choose to work for a company that helps with student loan repayment. Among current college students and recent grads, expectations are even higher – 86% of young workers said they’d commit to a company for five years in exchange for student loan repayment assistance. This signals huge loyalty potential: if you help employees tackle their debt, they’re far more likely to stick around.
Job decisions hinge on it: Nearly 70% of new college graduates say student loan debt will influence their job search or acceptance decisions. In another poll, 1 in 4 Gen Z students said a student loan repayment benefit is “essential” in their next job – not just a nice-to-have. Yet currently only about 10% of job postings mention student loan assistance. There’s a big gap between what young talent is seeking and what most employers offer. That gap is an opportunity for forward-thinking HR leaders to stand out (more on that below).
Financial wellness = employer of choice: For debt-burdened employees, a company that acknowledges and addresses this challenge sends a powerful message. “Employee demand for financial wellness benefits, specifically student-loan benefits, has been growing and can give employers a leg up in recruitment,” notes Tony Guadagni, HR director at Gartner. Offering a student loan 401(k) match tells candidates “we hear you, and we’re investing in your future” – a message that resonates with a generation seeking stability. The goodwill from helping employees pay off loans while saving for retirement is enormous. Younger workers genuinely appreciate an employer that “gets” their financial struggle, which can translate into stronger engagement and loyalty.
In short, today’s emerging workforce craves support for managing student debt, and they notice which employers provide it. By ending the debt-vs-retirement dilemma for your team, you not only alleviate their financial stress but also earn their trust and commitment.
Helping employees conquer debt and save for the future isn’t just a feel-good gesture – it’s a strategic move to become an employer of choice for the best young talent.
From an HR leader’s perspective, 401(k) student loan matching hits a sweet spot: it powerfully benefits employees and advances key HR goals – all with minimal cost or complexity to the company. Let’s break down the strategic advantages:
No New Budget Needed (Maximize Existing Dollars): This feature uses existing 401(k) match dollars rather than requiring new compensation or reimbursement funds. In essence, you’re extending your current match to employees who previously couldn’t take advantage of it. If an employee wasn’t contributing to the 401(k) due to loans, you weren’t paying them a match before. Now you will – but it’s comparable to what you’d spend if they had been contributing all along. It’s not a new line-item expense; it’s maximizing an existing benefit’s reach. Many companies find that initial uptake of the program is modest, so the budget impact stays very manageable – yet the perceived value by employees is extremely high. In short, you can significantly boost the value employees get from your benefits without significantly boosting your spend.
Improved Benefit Utilization & DEI/Equity: Traditionally, 401(k) matching dollars skew toward higher-paid or debt-free employees – those who can afford to contribute. Meanwhile, those struggling with student debt often miss out entirely. By adding a student loan match, you ensure more of your workforce actually receives the benefit you’re offering, improving utilization of your benefits budget. It also promotes benefit equity: employees with college debt (often first-generation graduates or those from underrepresented backgrounds) no longer get left behind in retirement savings. Everyone eligible for the 401(k) can earn the match, leveling the playing field. This kind of financial inclusivity shows that your company is committed to fairness and to all employees’ well-being. It’s a DEI win – addressing a socioeconomic disparity within your team. (After all, student debt burdens often fall disproportionately on those who lacked generational wealth or support.) Now, those employees can build wealth for the future just like their peers, thanks to your benefit.
High Impact on Retention: The link between student debt support and employee retention is compelling. When employees feel a company is invested in their personal financial goals, they reciprocate with loyalty. As noted above, 86% of young workers would stay 5+ years for an employer offering loan help. Even for mid-career staff, relieving financial stress boosts morale and commitment. One study found that turnover risk drops by over 50% among employees who receive student loan assistance, thanks to increased satisfaction and relief. That data is backed by early program results: employers using a student loan match saw a 58% reduction in likelihood of employee turnover among participants. It makes intuitive sense – an employee freed from the anxiety of “Should I pay loans or save for retirement?” is more likely to feel positive about their job and see a future with your company. Reducing that financial worry can even lift productivity; people who aren’t stressing about debt can bring more focus and energy to work. In fact, employees who strongly agree that their employer cares about their well-being are 69% less likely to job-hop and 3× more likely to be engaged at work. A relatively small employer contribution can yield a significant ROI through lower churn and higher engagement.
Boosted Employer Brand: In a competitive talent market, a student loan 401(k) match is a differentiator that very few employers currently offer. As of mid-2024, about 64% of companies said they had no plans to implement a student loan match (often due to inertia or misconceptions about cost) (fa-mag.comfa-mag.com). And less than 5% of companies have actually put a program in place so far. By adopting it early, you position your organization as an innovator and a champion of employee financial wellness. You might be one of the only employers in your industry offering this benefit – a talking point that makes you stand out to recruits. Internally, it signals that your HR team is tuned in to employees’ struggles and willing to take meaningful action. In an era when candidates and employees are watching how well companies support work-life balance and financial wellness, tackling the student debt issue head-on sends a powerful positive signal about your culture.
Minimal Admin Burden: Concerned about complexity or compliance? Good news – implementing a student loan match is much easier than running a separate loan repayment assistance program. Because contributions go into the existing 401(k) plan, they remain tax-deductible for the company and tax-advantaged for the employee. The government has made administration straightforward: as mentioned, the IRS allows a simple employee attestation for proof of loan payments, and provides special testing relief to avoid regulatory pitfalls. Major 401(k) recordkeepers and fintech providers have rolled out turnkey solutions to automate the process. In short, you don’t need to add headcount or become a student loan expert to offer this benefit. Your 401(k) provider may already have capabilities to handle it, or you can bring in a specialist platform to do the heavy lifting. (For example, Loan Certify is a purpose-built solution that integrates with your payroll or 401(k) recordkeeper to verify loan payments, handle certifications, and ensure the match contributions flow into the right accounts – at zero cost or risk to the employer.) Even lean HR teams can roll this out with confidence. The bottom line: you can achieve a high-impact boost to your benefits offering without adding significant work for HR.
In summary, 401(k) student loan matching offers a rare high-impact, low-cost addition to your benefits package. It repurposes budget you likely already allocate, amplifies the value employees get from it, and addresses a genuine pain point for a large segment of your workforce. That’s a win for your employees’ financial futures and for your organization’s talent strategy.
While this program is new, a number of forward-thinking employers have already embraced 401(k) student loan matching – and their experiences illustrate the upsides:
Major employers leading the way: Over 100 corporations partnered with large 401(k) providers (such as Fidelity) to launch student loan matching programs in 2024. Big names like Verizon, Dow, News Corp, and Liberty Mutual are among those now treating student loan payments as eligible for their 401(k) match. Liberty Mutual even promoted its new “401(k) Student Loan Match” on social media, highlighting that “we’ll match employees’ student loan payments in the form of 401(k) contributions, up to the full company match.” These early adopters prove that the benefit is feasible at scale and popular with employees. What started as a novel idea is quickly moving from concept to reality.
Mid-sized companies differentiating in recruiting: It’s not only Fortune 500 firms. For example, Kimley-Horn, an engineering consultancy (~5,000 employees), now features its student loan match prominently in recruiting materials. In job postings under “Financial Wellness,” they list: “Student loan matching in our 401(k)” alongside other perks. The message to candidates is clear: you don’t have to choose between paying your loans and saving for retirement here. This kind of benefit helps mid-sized employers punch above their weight in talent attraction, winning over candidates who might otherwise hesitate to contribute to a 401(k) due to debt. It’s a powerful differentiator in competitive hiring markets.
Impactful employee stories: The most powerful examples come from individual lives changed. Synchrony Financial rolled out a student loan 401(k) contribution feature in early 2024, and employees immediately felt the difference. One Synchrony employee with $180,000 in student loans said the program felt like “divine intervention” – she had paused her 401(k) contributions to focus on her massive debt, and now the company’s match (based on her loan payments) means she can resume saving for retirement without derailing her debt payoff. “I felt like, ‘I’m going to be pausing for so many years… and not able to get the company match. What am I missing out on?’” she said – until the new benefit “took that decision away, and I am not going to miss out”. Stories like this paint the employer as a hero in workers’ financial lives. Even smaller companies that have offered related student loan benefits have seen results: Avangrid, a utility company, previously gave employees up to $3,000/year in direct student loan payments and found it dramatically improved engagement and retirement readiness for younger employees. With the new SECURE 2.0 matching approach, similar outcomes are achievable without the direct expense.
Competitive industries jumping in: Banks, consultancies, and tech firms are adding student loan matches to keep up in hot labor markets. Recruiters report that even where salaries are high, young talent is drawn to employers who address student debt. Offering this benefit can tip the scales when candidates compare multiple offers. And remember, even employees without loans take note – seeing their company help colleagues in this way boosts overall pride and confidence in the employer. As one HR leader put it, “We want to eliminate any obstacle that might hold our people back. Helping with student debt shows we’re walking that talk.” The takeaway is clear: 401(k) student loan matching is gaining momentum fast. Early adopters aren’t shy about advertising it in job descriptions and LinkedIn posts, showcasing a culture of care and innovation.
Crucially, you don’t have to be a huge corporation to do it. Even organizations with lean HR teams are implementing this benefit, thanks to external support and automation. Pooled 401(k) providers, fintech platforms, and PEOs (professional employer organizations) are rolling out plug-and-play solutions so that small and mid-sized companies can easily join in.
If your competitors haven’t caught on yet, you have a prime opportunity right now to lead the pack as an innovative, employee-centric workplace.
For too long, the “debt vs. retirement” dilemma has weighed on employees and undermined the impact of 401(k) benefits. But it doesn’t have to continue at your organization. By embracing 401(k) student loan matching, you can eliminate that difficult choice for your workforce. This benefit uniquely empowers employees to pay off their student loans and build retirement security simultaneously, turning a zero-sum decision into a win-win outcome.
For HR leaders, it’s a chance to demonstrate true empathy and innovation in benefit design. You’ll be directly addressing one of the top financial challenges that keep your people up at night. In doing so, you’ll foster a level of goodwill and trust that few other perks could match. Early adopters of this strategy are already seeing results: stronger recruitment pulls, higher retention of young talent, and a reputation for leading on financial wellness. The playing field is still mostly open – very few employers offer this feature yet, so implementing it now lets you shine as a forward-thinking, caring employer.
Think about the message it sends when you tell a new hire: “We know student debt has been holding you back, so we’ve removed that barrier – we’ll help you save for retirement while you pay off your loans.” That is a powerful message, one that can tip the scales for candidates and that current employees will remember when considering their future with your company. It’s not often that HR finds a benefit that so clearly “does well by doing good,” but this is one of those rare opportunities.
Don’t let your 401(k) plan’s value go underutilized any longer. With SECURE 2.0 in place and solutions available to handle the logistics, now is the time to act. By ending the debt-versus-savings trade-off, you’ll help secure your team’s financial futures and strengthen your organization’s culture, diversity, and loyalty.
It’s time to make sure no employee at your company misses out on the 401(k) match.
Take the next step to implement 401(k) student loan matching and restore that “missing” half of your benefit’s value. Download Loan Certify’s latest capabilities deck and white paper to see how this program works in practice and how easily it can integrate into your existing 401(k) plan.
You’ll discover how our platform automates the entire process – eliminating administrative burdens, ensuring compliance, and operating at zero cost or risk to your organization.
Don’t miss the chance to turn a widespread financial challenge into a competitive advantage for your company. Let us help you launch a student loan 401(k) matching program that empowers your employees and elevates your benefits strategy.