Offering a 401(k) match on employees’ student loan payments is a new benefit enabled by the SECURE 2.0 Act – and it’s gaining traction. In fact, the number of employers offering student loan benefits has more than tripled in recent years (4% in 2019 to 14% in 2024) (shrm.org).
For CFOs and finance leaders, the big question is: What’s the return on investment (ROI) of implementing this benefit? This post provides a detailed cost/benefit analysis of student loan 401(k) matching, so you can make an informed decision for your organization.
Effective January 1, 2024, SECURE 2.0 allows employers to treat qualified student loan repayments as if they were 401(k) contributions for the purpose of making matching contributions (betterment.com). In practical terms, if an employee is repaying student loans instead of contributing to their 401(k), the employer can still contribute a 401(k) match on their behalf. Key details of this provision include:
Employee Self-Certification: Employees certify they made student loan payments (proof is not required unless the employer mandates it).
Normal Vesting Rules: Matching contributions for loan payments must follow the same vesting schedule as regular 401(k) matches.
Compliance Testing: Employees using the student loan match are tested separately for 401(k) nondiscrimination purposes, ensuring plan compliance is maintained.
This new flexibility means companies can extend retirement benefits to those focused on paying down student debt. The goal is to improve financial wellness and retirement readiness for employees with loans – but does it make financial sense for the employer? Let’s break down the costs and the benefits.
Implementing a student loan 401(k) match comes with some costs, but they are modest and largely predictable. CFOs should consider the following cost components:
Matching Contributions: This is the primary cost – the employer’s 401(k) match deposited for employees who are making student loan payments. The cost per employee will depend on your match formula and the employee’s salary. For example, at a 6% match rate, an employee earning $75,000 could receive up to $4,500 in employer contributions per year. (If your plan matches 50% of contributions up to 6% of pay, the cost would be roughly half that per employee.) It’s important to note that not every employee will utilize this benefit – only those with student debt who can’t otherwise contribute enough to get the full match. This means your actual uptake rate might be a subset of your workforce (e.g. perhaps 20-25% of employees, given about one in four workers carry student loans (attigo.com). Many companies budget for 401(k) match assuming high participation, so some of this cost may already be in your forecast.
Administrative and Compliance Costs: There is some minimal overhead to administer the program. If you use a modern 401(k) provider or a service like Loan Certify to manage student loan contributions, the added participant fees are often on the order of $5–$10 per participating employee per month. You may also incur a small cost for amending the plan and adjusting systems to track student loan payments (and handling annual separate compliance testing, if your recordkeeper charges for it). In many cases, these fees are minimal or even waived – for instance, some providers charge no extra testing fees even if plan participation increases. Employers can also choose to pass along nominal per-user admin fees to employees, though absorbing the cost is a goodwill gesture.
Operational Process: Employers will need a process for collecting employee self-certifications of loan payments and making periodic matching contributions. This can be handled via HRIS/Payroll integration or through a third-party service to streamline the workflow. In other words, administering the student loan match is a solvable operational challenge and typically does not require significant ongoing labor from your HR/finance team once set up.
Overall, the direct financial cost of offering a student loan 401(k) match is largely the matching contributions themselves, plus a small administrative overhead. For a rough estimate, consider a scenario: if 100 employees qualify and each receives an average of $1,500 in matches per year, that’s $150,000 in direct costs. Now, compare that to the benefits gained – especially in employee retention and engagement – which we explore next.
One of the strongest arguments for student loan matching is improved employee retention. Turnover is expensive, and offering meaningful benefits that encourage employees to stay can yield substantial savings. Here’s why student loan benefits are powerful retention tools:
High Employee Demand: Employees greatly value help with student debt. In a 2022 Betterment survey, 64% of employees said student loans have impacted their ability to save for retirement, and 21% said a 401(k) match on student loan payments would entice them to leave their current job for another employer who offers it. In another study, an overwhelming 88% of employees said they would increase their commitment to their employer if student loan repayment assistance were offered. This indicates that providing such a benefit can significantly boost loyalty and reduce the likelihood of employees seeking opportunities elsewhere.
Proven Reduction in Turnover: Early adopters of student loan benefits have reported impressive retention gains. Fidelity Investments, which offers a student debt benefit, saw a 26% reduction in employee turnover among workers enrolled in the program (workingideal.com). In other words, employees using the student loan benefit left at a much lower rate than those who didn’t. Another analysis of a company with a robust student loan benefit showed an annualized turnover of just 1.8% for program participants (youbenefited.com) – a staggeringly low figure in an era when average turnover might be 15–20%. While results will vary by company, these data points demonstrate the potential for dramatically improved retention.
Turnover Cost Avoidance: Avoiding even a handful of employee departures can justify the program cost. Replacing an employee is costly, even if that cost doesn’t always show up in an obvious line item on the P&L. Studies peg the cost of losing an employee at roughly 6 to 9 months’ salary (per SHRM) or even 50% to 200% of annual salary (per Gallup) when you include recruiting, training, and lost productivity. For a $75,000 salaried employee, that implies $37,500 to $150,000 in replacement costs each time you turn over a position. By contrast, the cost to provide that employee a student loan 401(k) match might be in the few thousands of dollars per year. A hypothetical example illustrated by Betterment shows that for a $75k employee with a 6% match, the employer’s annual cost ($4,500 in match + ~$120 in fees) would take over 7 years to even equal the low-end cost of replacing that employee. In other words, retaining just one valuable employee for a few extra years more than pays for offering the match to many employees.
Longer Tenure and Institutional Knowledge: Beyond the hard dollars, reduced turnover means employees stay longer, gaining experience and institutional knowledge that increases their productivity. It also fosters a more stable team environment. Each additional year of service from a knowledgeable employee is an intangible gain – one that contributes to continuity in projects, stronger client relationships, and mentorship of junior staff. These benefits are hard to quantify, but CFOs know they have real value in maintaining operational performance.
In summary, the ROI from retention alone can justify student loan 401(k) matching. By investing a relatively small amount in employees’ financial well-being, companies can save huge amounts by avoiding the churn and replacement of talent. Think of the match benefit as an investment in talent that pays dividends in loyalty.
While retention is often the biggest ROI driver, student loan 401(k) matching also delivers benefits in recruitment and employee engagement – which ultimately affect the bottom line as well:
Competitive Hiring Advantage: As mentioned, 21% of employees (and an even higher 50% of new hires with student debt, according to Fidelity) say a student loan match or repayment program is a major factor in choosing an employer. In a tight labor market, offering this benefit can differentiate your company and attract top talent who might choose an employer that helps with their student debt over one that doesn’t. This can reduce recruiting costs and time-to-fill positions, since your offer package is more compelling. It’s essentially a targeted compensation enhancement for the large segment of the workforce dealing with education debt.
Greater Employee Engagement and Productivity: Financial stress is a known productivity killer. Employees distracted by money worries are less engaged at work. A 2023 PwC Employee Financial Wellness survey found that more than half of workers (56%) spend at least three hours per week at work dealing with personal finances (creditunions.com), and 44% of financially stressed employees report being distracted by these issues on the job. Student loan debt is one of the top stressors for younger employees; alleviating that burden can free them to focus more on their work. By helping employees make progress on their loans and save for retirement, a student loan 401(k) match addresses a key source of stress. The expected outcome is improved productivity – employees who are less worried about their debt and more appreciative of their employer’s support tend to be more engaged. In fact, employees commonly say student loan assistance would improve their morale and commitment (attigo.com). Over time, higher engagement can translate to better performance, innovation, and customer service, all of which have financial benefits for the company.
Retirement Plan Participation and Financial Wellness: One often overlooked benefit is the boost in overall retirement plan participation and savings rates. Many employees with student loans forego contributing to their 401(k) – some studies found 45% of all employees (and 54% of younger workers) would prefer student loan help over contributing to a retirement plan if forced to choose (laboriq.co). This trade-off is detrimental to their long-term financial health. By offering a student loan match, employers eliminate the need for that choice: employees can secure the 401(k) match while paying their loans. This encourages more workers to engage with the 401(k) plan earlier in their careers. Data shows that employees who participate in a retirement plan are 32% less likely to quit in a given month – so increasing your plan’s participation through this benefit can further enhance retention. It also means your workforce will be more financially prepared for the future, which has important implications for your company’s long-term costs (as we discuss next).
Beyond the immediate retention and productivity benefits, CFOs should consider the long-term workforce planning advantages of improved financial wellness. Helping employees balance debt repayment with retirement saving sets them up for greater financial security, which can save the company money in the long run:
Better Retirement Readiness: Employees who can’t afford to save for retirement in their early and mid-career years often end up with insufficient retirement funds decades later. Indeed, 80% of retirement plan participants with student debt say that debt has delayed their retirement planning. If employees lack adequate savings, many will choose (or be forced) to delay retirement, working additional years. This trend is already visible: a significant share of Baby Boomers plan to retire later than 65, often due to financial need. From a finance leader’s standpoint, delayed retirements can quietly inflate labor costs. Research by Prudential found that each year an employee delays retirement costs an employer on average $50,000 in incremental costs (plansponsor.com). This comes from higher salaries and benefits for senior workers versus lower-cost replacements, and higher healthcare costs – a 65-year-old’s healthcare expense is roughly double that of a 45-54 year old. Moreover, blocked advancement opportunities and lower productivity from employees who’d rather be retired are additional hidden costs.
Delayed Retirement Cost Avoidance: By facilitating retirement savings through the student loan 401(k) match, employers can improve the likelihood that employees can retire on time. Over many years, the matches made on student loan payments in employees’ 20s and 30s will compound, boosting their 401(k) balances. This means by the time they reach their 60s, they are more likely to be financially prepared to retire when they wish, rather than hanging on solely because they can’t afford to retire. For the company, this avoids those $50k-per-year delayed retirement costs down the line. For example, consider a future scenario: a company with 3,000 employees could save $2–3 million per year if the average retirement age is reduced by just one year through better savings. Offering student loan matching is an early intervention that contributes to that kind of outcome by improving overall financial wellness and retirement readiness.
Workforce Morale and Well-Being: While harder to quantify, there’s ROI in being seen as a company that truly invests in employees’ well-being. Student debt is a massive source of stress for millions (Americans owe nearly $1.77 trillion in student loans collectively). An employer that steps up to help is likely to enjoy stronger morale, a positive corporate image, and higher engagement. These factors can reduce burnout and absenteeism and enhance your employer brand, indirectly saving costs related to low productivity or hiring due to reputation. As one survey highlighted, 88% of workers said a student loan benefit would increase their commitment to the employer. Employees who feel supported tend to stick around and contribute their best effort – outcomes that absolutely have financial value for the business.
When you tally it all up, the business case for student loan 401(k) matching is compelling. On the cost side, you have a relatively modest annual expense (the matching contributions for those who use the benefit, plus minor admin costs). On the benefit side, you have tangible savings from higher retention, improved productivity, and potentially lower long-term workforce costs. It’s an investment in human capital that can yield returns in multiple ways:
Hard ROI Calculation: A straightforward ROI model might compare the cost of the benefit to the savings from avoided turnover. For instance, if offering this benefit keeps even one mid-level employee (salary ~$75k) from quitting each year, you save perhaps $40k–$50k (conservatively) in recruiting and training costs. If the program costs $150k per year, the retention of just three employees at that level likely pays for itself. Many companies could realistically retain far more than three people by implementing a highly desired benefit like this. And this doesn’t yet factor in productivity gains or delayed retirement savings, which are harder numbers to crunch but nonetheless real.
Intangible Returns: CFOs also recognize the value of less quantifiable outcomes – a more engaged workforce, a stronger culture of loyalty, and an employer value proposition that stands out. These contribute to sustained performance and can support better financial results over time (for example, higher customer satisfaction and innovation driven by engaged, stable teams).
In short, offering a student loan 401(k) match under SECURE 2.0 is not just a feel-good move, but a sound financial decision. It aligns with a modern talent strategy: addressing employees’ pain points in exchange for greater retention and productivity. As one analysis put it, it would take many years of providing the match benefit to even come close to the cost of losing a single key employee. Seen in that light, the ROI is easy to justify.
Conclusion: For finance leaders calculating the value of benefits, student loan 401(k) matching is a prime example of investing a dollar to save several. By helping employees eliminate debt and build savings, you’re ultimately investing in a more stable, loyal, and productive workforce. The SECURE 2.0 provision makes it easier than ever to implement this benefit within the 401(k) framework, leveraging tax advantages and existing plan infrastructure. Many early-adopter employers are already seeing positive results, and as adoption grows, those who lag behind risk missing out on the advantages in talent attraction and retention.
To fully evaluate how a student loan 401(k) match program would look in your organization – including detailed cost modeling and implementation steps – it’s helpful to get expert input. Loan Certify specializes in AI-powered solutions to administer 401(k) student loan matching programs seamlessly. We invite you to learn more about how this benefit can work for your company.
Call to Action: Download Loan Certify’s capabilities deck or white paper to explore our solution and discover how to maximize the ROI of student loan benefits for your workforce. Empower your employees and strengthen your talent ROI under SECURE 2.0 today!