Last year didn’t exactly end on a high note for student loan borrowers. After a more than three-year pause on federal student loan repayment and interest, borrowers had to resume forking over their money to lenders again last fall.
The transition wasn’t easy: The Department of Education recently reported that 40% of borrowers missed the due date for their first monthly bill. (Which is pretty much what experts predicted would happen shortly before the payment pause ended.)
Borrowers struggling to pay back their student loan debt don’t have much room, if any, to save for retirement. In another 2023 report, this one from Fidelity, 84% of student loan borrowers said that their debt impacts their ability to put away money for the future. What’s more, the report found that roughly 30% of borrowers eligible to participate in a workplace retirement plan aren’t contributing.
That could change for some borrowers in 2024 thanks to new retirement benefits made possible by the SECURE 2.0 Act. Companies now have the option to count student loan payments as “elective deferrals,” and make matching contributions to eligible workers’ defined contribution plans. In other words, many employees can now save for retirement — via their company’s match benefit — simply by paying their education debt on time.
Unlike certain SECURE 2.0 provisions that kick in this year, the student loan savings match is optional, so companies must choose to incorporate it into their benefits. It’s hard to say just how widely the benefit will be implemented, but Kevin Gaston, director of plan design consulting for the fintech company Vestwell, expects industries that require more education — like health care and legal professions — to have higher adoption rates.
“In a world where we see the average tenure of employees continuing to [decline] … this is not an expensive way to get more folks to stick around, and stick around longer,” he says.
Gaston encourages employees — regardless of their industry — to reach out to their HR departments and advocate for the student loan savings match to be added to their company’s benefits package.
“There’s an amazing moment here [for] employees,” he says. “This is their chance to make up for lost time.”
— Mary Ellen Cagnassola, Money reporter
