Student loans have become a $1.8 trillion burden for millions of Americans. But a new law signed by President Biden may help borrowers pay off their loans while saving for retirement. Jennifer Zabasajja explains.

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.

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As student loan debt continues to be a burden for many recent graduates, companies are starting to offer a unique benefit to help alleviate this financial stress. Some companies have started to offer a 401(k) match for student loan payments, providing an innovative solution to help employees pay off their debt while also saving for retirement.

Traditionally, employers offer a 401(k) match where they contribute a certain percentage of an employee’s salary to their retirement account. However, with the rising cost of education and student loan debt, many employees are struggling to balance their loan payments with saving for retirement. Recognizing this challenge, some companies are now offering a new type of 401(k) match that allows employees to allocate their employer contributions to their student loan payments instead of their retirement account.

This new benefit is a win-win for both employees and employers. Employees can pay off their student loan debt faster with the help of employer contributions, while also saving for retirement through their own contributions. This can help employees become debt-free sooner and start building their savings for the future.

For employers, offering a 401(k) match for student loan payments can be a powerful tool for attracting and retaining top talent. In a competitive job market, companies are looking for ways to differentiate themselves and provide valuable benefits to employees. By offering this unique benefit, employers can show their commitment to supporting their employees’ financial well-being and helping them achieve their long-term goals.

Some companies that have already implemented this benefit have seen positive results. Employees appreciate the support in paying off their student loans and feel more engaged and motivated at work. This type of benefit can also help improve employees’ financial wellness, which can lead to higher job satisfaction and productivity.

While this new type of 401(k) match is still relatively new, it is a promising trend that could become more widespread in the future. As student loan debt continues to be a major concern for many Americans, companies that offer innovative solutions to help employees manage their debt and save for retirement will likely be viewed as industry leaders in employee benefits.

In conclusion, offering a 401(k) match for student loan payments is a forward-thinking benefit that can have a positive impact on both employees and employers. Companies that prioritize their employees’ financial well-being and provide support in paying off student loans will likely see increased employee satisfaction, retention, and overall success in the long run. This innovative benefit could be a game-changer in the world of employee benefits and help employees achieve their financial goals.