It’s no secret that today’s younger workers are financially strapped by student loans. For many Gen Z and Millennial employees, the burden of college debt looms larger than retirement on the horizon.
Enter student loan 401(k) matching – an innovative benefit that helps pay down loans and save for retirement at the same time. This perk is gaining traction as a must-have offering for attracting and retaining young talent. Why?
Let’s dive into the hiring trends and financial challenges behind its popularity, and see how it stacks up against traditional retirement incentives.
Gen Z and Millennials are coming of age in the midst of a student debt crisis. Total U.S. student loan debt hit a staggering $1.75 trillion in 2022 (Applicants Expect Student Debt Relief from Employers | Paidly), and the average new graduate enters the workforce owing over $30,000 (Applicants Expect Student Debt Relief from Employers | Paidly).
With numbers like that, it’s no wonder young professionals are feeling the squeeze. In fact, almost half of Gen Z adults have already taken on student loans (Student Loan Debt by Generation (2024): Millennials, Gen Z, etc.), and roughly one in four American workers of any age is impacted by student debt (Supporting Your Workforce With the Student Loan Benefits They Want and Need). This debt load is shaping financial decisions early in careers.
One major side effect: long-term saving gets put on the back burner. An overwhelming 81% of people with student loans have delayed important life goals, including saving for retirement, because of their debt (401(k) Match for Student Loan Repayments: What You Need to Know). Many Millennials and Gen Z graduates simply can’t afford to max out a 401(k) when student loan bills are due. As a result, they’re often forced to choose: pay down debt or contribute to retirement.
This trade-off leaves young workers feeling frustrated and financially vulnerable. It’s also causing significant stress – a recent survey found 91% of young adults with student loans report that money stress is affecting their wellness (Ninety-One Percent of Young Adults With Student Loans Say ...). Clearly, the struggle is real.
Younger employees aren’t shy about voicing what they need from their employers. While traditional perks like health insurance and 401(k) plans still matter (65% of undergrads won’t even accept a job that lacks a company 401(k) plan (Navigating Employee Benefit Expectations in a Multi-Generational Workplace)), early-career talent is also looking for solutions to their immediate financial challenges.
And student loan help is high on the list.
Surveys show that student loan repayment assistance is a top priority for younger generations. Only about 20% of Gen X workers ranked student loan repayment as their #1 desired benefit – but 27% of Millennials and 34% of Gen Z did so (The Generational Divide in Benefits Prioritization Grows). Among the youngest workers (age 18–24), a striking 39% picked student loan repayment as the most important benefit of all (The Generational Divide in Benefits Prioritization Grows).
In other words, many new grads value loan relief even above things like extra vacation or free food. They’ve seen college costs skyrocket and are looking to employers for support with that burden.
That doesn’t mean younger employees don’t care about retirement – far from it. 401(k) matching is consistently a top-three benefit across generations (The Generational Divide in Benefits Prioritization Grows). The difference is that Gen Z and Millennials need a bridge to actually take advantage of it.
A standard 401(k) match is great on paper, but if you’re too broke from loan payments to contribute your portion, you miss out entirely. This is exactly the gap that student loan 401(k) matching fills.
Employers typically match a percentage of the employee’s contributions to their retirement plan. For example, a common formula is dollar-for-dollar on the first 3-5% of salary. It’s a tried-and-true incentive to encourage saving. However, the catch for many young professionals is that you must contribute your own money to get the full match.
With hefty loan payments every month, a lot of Gen Z and Millennials just can’t afford to contribute enough (or at all) to snag that “free” employer money. The result? They leave matching dollars on the table and fall behind on retirement savings while digging out of debt.
This newer benefit flips the script. Thanks to the SECURE 2.0 Act of 2022, companies can now offer a 401(k) match based on student loan payments instead of only 401(k) contributions (401(k) Match for Student Loan Repayments: What You Need to Know). In practice, if an employee is paying, say, $300 a month toward their student loans, the employer can contribute an equivalent match into the employee’s 401(k) – just as if that loan payment were a 401(k) deferral.
The employee doesn’t have to put in their own retirement money to get the match; they earn it by responsibly paying down their debt. It essentially rewards them twice for the price of one payment.
For a Gen Z or Millennial worker, this is huge. It means no more agonizing choice between paying loans and saving for retirement.
As Walgreens’ HR chief put it when rolling out their student loan 401(k) program, employees “are no longer faced with the difficult choice between managing their student loan debt and investing in a secure financial future – now they can confidently do both” (SECURE 2.0 student loan matching will serve as talent magnet | EBA | Employee Benefit News).
The employer’s cost is similar to a normal match, but the impact for the employee is transformative: they can chip away at debt and build a nest egg concurrently. In short, student loan matching modernizes the 401(k) for the realities of today’s workforce.
It’s a competitive hiring market out there, and companies are realizing that student loan benefits can be a game-changer for recruiting young talent. Recent grads are actively seeking out employers who will help tackle their student debt.
In one survey, 86% of young workers said they would commit to a company for five years if it helped pay off their loans (Applicants Expect Student Debt Relief from Employers | Paidly). More than half even said they had applied to jobs specifically because the employer offered a student loan repayment perk (Applicants Expect Student Debt Relief from Employers | Paidly). That kind of loyalty boost is gold for employers facing high turnover among early-career staff.
It’s not just hypothetical – we’re seeing this trend play out in real time. A few years ago, student loan benefits were rare; only about 8% of employers offered any loan assistance in 2019 (Applicants Expect Student Debt Relief from Employers | Paidly). Fast forward to 2023, and over 34% of employers are offering some form of student loan help (Applicants Expect Student Debt Relief from Employers | Paidly).
In fact, a recent report found that what started as a niche perk is quickly becoming mainstream and expected at leading companies (Applicants Expect Student Debt Relief from Employers | Paidly). Employers large and small, from hospitals to tech firms, are adding student debt support to their benefits lineup to stay competitive.
If you don’t offer it, you risk losing candidates to those who do (Applicants Expect Student Debt Relief from Employers | Paidly).
The payoff in retention is significant. Companies that implement student loan 401(k) matching or repayment assistance often see higher morale and lower turnover. Employees feel understood and valued when their employer addresses a top stressor in their lives. Financial wellness improves, stress goes down, and productivity goes up (Applicants Expect Student Debt Relief from Employers | Paidly).
One study found that 88% of employees would increase their commitment to their employer if student loan assistance is provided (Supporting Your Workforce With the Student Loan Benefits They Want and Need). Simply put, helping young workers get out of debt is a powerful way to earn their long-term loyalty.
Student loan 401(k) matching is more than a trendy perk; it’s a practical response to the challenges facing a new generation of employees. By bridging the gap between immediate financial needs and future security, this benefit delivers the kind of support Gen Z and Millennials genuinely appreciate.
Employers offering it can turn a source of financial kryptonite into a recruitment superpower – at little to no extra cost beyond their normal retirement contributions.
If your organization is looking to stand out to younger hires (or just do right by your rising talent), it might be time to consider implementing a student loan match program.
The good news is that new rules make it easier than ever to set up, and providers like Loan Certify can handle the heavy lifting of compliance and administration. The result is a win-win: employees crush their debt and grow their 401(k), while you reap the rewards of a happier, more engaged workforce.
Ready to learn more? Don’t stop here. Take the next step toward empowering your team’s financial future.
Download Loan Certify’s Capabilities Deck or White Paper to see how 401(k) student loan matching can become your organization’s secret weapon in the battle for Gen Z and Millennial talent.