Many employees – especially Millennials and Gen Z – face a painful financial dilemma with each paycheck: pay off student loan debt or save for retirement?
With limited dollars to go around, focusing on one goal often means sacrificing the other. A young professional might forgo contributing to her 401(k) (and miss out on employer matching dollars) because her student loan bills demand priority.
Meanwhile, delaying retirement saving in one’s 20s and 30s can dramatically hurt long-term financial security. For example, investing $200 a month from age 25 to 65 can grow to over $500,000 by retirement (johnhancock.com) – a nest egg many are missing out on because their budget is tied up in loan repayments. This “debt vs. retirement” dilemma leaves workers feeling stuck and anxious about their futures, and HR leaders witnessing a generation of employees unable to fully utilize their retirement benefits.
The scope of the issue is staggering. Outstanding student loan debt in the U.S. now tops $1.77 trillion across 42.7 million borrowers (educationdata.org). That burden directly hinders retirement readiness: roughly 60% of employees with student debt delay saving for retirement as a result (loancertify.com). In one survey, 26% of Americans said they’ve put off saving for retirement specifically due to student loans (bankrate.com), and an alarming two-thirds of working Millennials have nothing saved for retirement at all – in large part because they’re busy “paying down debt and covering living expenses” instead of investing for the future.
Gen Z is on a similar track: about 74% of Gen Z borrowers and 68% of Millennials report delaying key financial decisions (like 401(k) contributions, homebuying, or emergency savings) because of student loans. The result is a generation falling behind on retirement security just as they’re starting their careers. It’s a lose-lose scenario – unless employers find a way to help employees tackle both goals simultaneously.
Imagine if your employees didn’t have to choose between paying down their 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.
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 retirement plan. This effectively ends the “either-or” tradeoff: employees can reduce their debt and grow their retirement savings at the same time, with help from your company.
Here’s how it works: 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 toward student loans (i.e. $3,600 a year) would be eligible for a $1,800 employer contribution to her 401(k) – even though she didn’t contribute to the 401(k) from her paycheck. In other words, by making loan payments, she still receives the “free” retirement money that she would have otherwise missed out on.
The new law is designed to “help employees balance saving for retirement with paying off student loan debt” (businessinsider.com), effectively allowing workers to avoid the dilemma of choosing one financial priority over the other. It’s a true win-win that wasn’t possible before.
This provision took effect for plan years starting in 2024, and adoption is optional – meaning employers can amend their 401(k) or 403(b) plans to add this feature. All the usual plan rules (eligibility, vesting schedules, annual 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 who gets the student loan match). The IRS has already issued guidance to streamline administration: notably, employers can rely on employees’ self-certification of their student loan payments to qualify for the match.
In practice, that means HR does not need to collect loan statements or police every payment – employees simply attest that they made qualifying loan payments, and those amounts count toward the match. SECURE 2.0 also provided some relief on 401(k) nondiscrimination testing for plans that implement this feature, making it easier for companies of all sizes to offer it without running afoul of complex testing rules.
Lawmakers were motivated to create this benefit after recognizing that millions of younger workers were forgoing 401(k) contributions (and missing out on employer matches) because of student debt. Now, with a smart plan design tweak, employers can help their people “pay down debt now and save for the future,” eliminating a major source of financial stress.
Jesse Moore, Head of Student Debt at Fidelity Investments, put it well when describing this new program: “The student debt retirement provision is particularly exciting as it directly addresses retirement savings — which is one of the top areas we see so many borrowers forced to cut back on due to their student debt” (mytrustplus.org). By offering a student loan 401(k) match, you’re directly solving that problem. Employees no longer have to choose between their present and future finances – your benefit helps them 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 determination to find 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 statistics and trends:
High demand for loan relief: 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 job 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 even mention student loan assistance. There’s a big gap between what young talent is looking for and what most employers are offering, which 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, and can translate into improved employer brand, stronger engagement, and reduced turnover.
In short, today’s younger workforce craves support for managing student debt, and they notice which employers provide it. By ending the debt-vs-retirement dilemma for your employees, you not only alleviate their financial stress but also earn their trust and commitment. Next, we’ll look at why this benefit isn’t just good for employees – it’s also a smart strategy for HR.
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: This benefit 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 the initial uptake of the program is modest, so the budget impact is very manageable – yet the perceived value by employees is high.
Maximized Benefit Utilization & Equity: Traditionally, 401(k) matching disproportionately benefits those employees who are able to contribute to the plan. 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 spend. 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 demonstrates that your company is committed to fairness and employee wellbeing across the board.
High Impact on Retention: The link between student debt support and employee retention is compelling. When employees feel a company is investing in their personal financial goals, they reciprocate with loyalty. As noted above, 86% of young workers would stay at least 5 years for an employer offering loan repayment help. Even for mid-career employees, helping relieve financial stress can boost morale and commitment. One study found that turnover risk drops by over 50% among employees who receive student loan assistance, due to increased satisfaction and relief. Beyond the stats, it’s intuitive: 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 envision a future with your company. Reducing financial stress can also lift productivity – people who aren’t worrying about debt can bring more focus and energy to work. In fact, employees who strongly agree that their employer cares about their wellbeing are 69% less likely to search for a new job and three times more likely to be engaged at work. These kinds of outcomes turn a relatively small employer contribution into a significant ROI through lower churn and higher engagement.
Strengthened Employer Brand: In a competitive talent market, a student loan 401(k) match is a differentiator that few other employers currently offer. As of mid-2024, about 64% of companies said they had no plans to implement a student loan 401(k) match yet (often due to inertia or misconceptions about cost). 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 could be one of the only employers in your industry offering this benefit – a talking point that makes you stand out to recruits. Internally, it shows current employees that your HR team is tuned in to their struggles and willing to take meaningful action. In an era when employees (and candidates) are judging companies by how well they support work-life balance and wellbeing, tackling the student debt issue head-on sends a powerful positive signal.
Admin Simplicity (No Extra Headcount): Concerned about complexity or compliance? The good news is that implementing a student loan match is far easier than, say, running a separate loan repayment stipend program. Because contributions go into the 401(k), they remain tax-deductible for the company and tax-advantaged for the employee. The government has also made administration straightforward – the IRS is allowing a simple employee attestation for proof of loan payments, and has provided special nondiscrimination testing relief to avoid any regulatory pitfalls. Additionally, many 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. (We’ll discuss implementation next.)
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 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. It’s quickly moving from concept to reality.
Mid-sized companies differentiating in recruiting: It’s not only Fortune 500 firms. Kimley-Horn, an engineering consulting company (~5,000 employees), prominently features its student loan match in recruiting materials. In job postings under “Financial Wellness,” Kimley-Horn lists: “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 communication 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.
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. Stories like this spread quickly and 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 match, 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 from these examples is that 401(k) student loan matching is rapidly gaining momentum. Early adopters are not only advertising it in job descriptions and offer letters, but also showcasing it in employer branding (e.g. LinkedIn posts, career site stories) to demonstrate a culture of care.
And you don’t have to be a huge corporation to do it – even organizations with lean HR teams can implement this benefit thanks to external support and automation. 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.
One of the best aspects of the SECURE 2.0 student loan match is that it can be added with minimal lift for your HR/benefits team. Many 401(k) plan providers have built-in capabilities to administer the match on student loan payments, and what’s not handled by the recordkeeper can be managed by specialized vendors. In other words, you won’t need a dedicated admin internally to run this program.
Key implementation notes:
Plan amendment and setup: To offer the benefit, you’ll work with your 401(k) provider to amend the plan documents to include “qualified student loan payments” in the matching formula. This is straightforward and providers have templates ready (given the surge of interest in this feature in 2024). You can choose to implement at the start of a plan year or even mid-year if needed (the law allows mid-year adoption, especially for safe harbor plans, under the IRS guidance).
Employee verification: As mentioned, the IRS is allowing employees to self-certify that they made qualifying loan payments. Typically, an employee will attest (via a simple form or online portal) to the amount of student loans they paid in a given period. Your vendor or recordkeeper will use that attestation to calculate the appropriate match contribution. This honor-system approach keeps things simple – you don’t have to collect receipts for each loan payment. (Of course, there are audit mechanisms if something seems off, but generally it’s low-trust, low-effort.)
Compliance and reporting: Contributions made as “student loan match” are deposited into the employees’ 401(k) accounts just like regular match dollars. They’re subject to the same tax-deferred growth and withdrawal rules, which means employees can’t take the money out immediately (it’s for retirement) – a feature that actually enhances retention. From a compliance standpoint, SECURE 2.0 included provisions to simplify testing so that even if, say, a higher proportion of younger employees utilize this benefit, it won’t skew your plan testing results. Regular annual reporting (Form 5500, etc.) will just include these contributions as employer match. In essence, once the program is set up, it runs in the background much like your normal matching contributions.
Leverage technology and partners: You do not need to build a new system to track student loan payments. Purpose-built solutions now exist to automate everything. For example, Loan Certify is a platform specifically designed to administer 401(k) student loan matching programs seamlessly. It integrates with your payroll or 401(k) provider to verify employees’ loans and payments, handle the ongoing certification process, and ensure contributions go into the right accounts. Loan Certify essentially “takes over” the heavy lifting of compliance, verification, and reporting for the student loan match. That means zero extra work for your team and no worrying about IRS rules – the software ensures the program runs smoothly and by the book. Moreover, it’s a zero-cost solution for employers (the goal is to use existing benefit dollars efficiently, not add new expenses). By partnering with a specialist, even a small HR team can roll out this benefit with confidence and minimal effort. The vendor will typically also provide employee education materials, calculators, and support to maximize participation and appreciation.
Ultimately, implementing a student loan 401(k) matching program can be a painless process. With the legal framework in place and vendor support available, there’s little reason to wait. The sooner you set it up, the sooner your company can start closing the retirement savings gap for employees and reaping the rewards in loyalty and engagement.
The “debt vs. retirement” dilemma has weighed on employees for far too long – 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 allows 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, and in doing so, you’ll foster a level of goodwill and trust that few other benefits could match.
Early adopters of this strategy are already seeing the results: improved 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 benefit yet, so implementing it now lets you shine as a forward-thinking, employee-centric workplace. Picture the impact on a new hire when you tell them: “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 when candidates choose jobs and one that current employees will remember when considering their career future with you. 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 employees lose out on any more 401(k) matches or years of compounding growth. With the SECURE 2.0 Act in place and solutions like Loan Certify available to handle the details, now is the time to act. By ending the debt-vs-savings trade-off, you’ll help secure your team’s financial futures and strengthen your organization’s culture and loyalty.
Take the next step to implement 401(k) student loan matching at your company. Download Loan Certify’s latest capabilities deck and white paper to see how this program works in practice and how easily it can be integrated 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 this chance to transform a generation’s financial dilemma into a competitive advantage for your company. We can help you launch a student loan 401(k) matching program that empowers your employees and elevates your benefits strategy. Let us help you end the ‘debt vs. retirement’ dilemma for your team – and watch the positive impact on recruitment, retention, and overall employee well-being.