How to Save for Retirement by Paying Down Your Student Loans
Paying down student debt or saving for retirement can seem like mutually exclusive goals. A little-known workplace benefit could soon allow more workers to do both.
A provision of the omnibus spending bill signed by President Joe Biden in December formally allows employers to extend their 401(k) match programs to include any payments an employee makes toward student debt. It will go into effect in January 2024. The matches function much the same way traditional 401(k) programs do, with the company depositing its contribution into the worker’s retirement account.
Once 2024 hits, “we’re going to see a lot of employers start implementing this,” said David Amendola, a leader at insurance company Willis Towers Watson’s benefits advisory and compliance group. “It’s really going to shift the market.”
The rule change comes amid serious doubts about the Biden administration’s debt relief program, which aims to forgive up to $20,000 in federal loans per borrower and is currently on hold as the Supreme Court prepares to hear two Republican-led challenges. Even if it proceeds, the one-time forgiveness won’t wipe out Americans’ $1.8 trillion student debt balance, and employers looking to attract and retain young and diverse talent might use such 401(k) matching to stand out from the competition.
In an October survey by the nonprofit Employee Benefit Research Institute, 25% of employers said they currently offer student debt repayment assistance as a benefit. Of those, nearly half offer a 401(k) match contribution tied to student-debt payments.