What this article covers
Thanks to Section 110 of the SECURE 2.0 Act, employers can now make retirement-plan matching contributions based on employees’ qualified student loan payments, not just their own plan contributions. Opher Ganel explains which plans qualify, walks through a $100,000-salary example showing how borrowers can pay down debt faster without giving up the match, and shares why one advisor says employees should ask for the benefit.
Key Takeaways
SECURE 2.0 lets employers match student loan payments with retirement contributions
Section 110 of the SECURE 2.0 Act allows employers to treat an employee’s qualified student loan payments as if they were retirement-plan contributions for matching purposes. It took effect for plan years beginning after December 31, 2023, and qualified payments are defined broadly as repayment of debt incurred solely to pay the employee’s qualified higher-education expenses.
The student loan match applies to 401(k), 403(b), SIMPLE IRA and governmental 457(b) plans
The provision is aimed at employees whose student debt keeps them from contributing enough to earn the full employer match. Employers offering these plan types can base matching contributions on loan repayments instead of, or alongside, salary deferrals.
Borrowers can pay down student debt faster without losing the employer match
In the article’s example, an employee earning $100,000 with a dollar-for-dollar match up to 6% can afford $6,000 a year in total. Before the change, splitting it $3,000 to the loan and $3,000 to the plan earned only a $3,000 match; under Section 110, putting all $6,000 toward the loan can still earn the full $6,000 match, and once the loan is paid off the total rises to $12,000 a year.
Matt SmithEmployers can provide student loan repayment benefits to help employees with matching contributions to reduce debt thanks to SECURE 2.0 act.
We were fortunate (you might say privileged) enough to avoid student loans while our three kids went to college. As a result, all three graduated with $0 in student loan debt.
Not everyone is so lucky. Some of my clients racked up over $350,000 in student-loan debt. That level of debt is crippling. It can stop you from buying a house, getting married, having kids, and saving for your kids’ college and your own retirement.
In short, it can force you to put much of your life on hold. For years or even decades.
If you’re in a similar situation (hopefully not to such an extreme), recent tax-law changes may bring you a bit of cheer.
SECURE 2.0 and Student Loans: More Than a Retirement Savings Law
Politicians sure love acronyms, don’t they?
Some even sort of make sense. Here’s an example: “Setting Every Community Up for Retirement Enhancement” or SECURE.
In 2019, Donald Trump signed into law the original SECURE Act. Call it SECURE 1.0. Then, this past December, Joe Biden signed into law the SECURE Act 2.0 as part of a huge omnibus budget law.
Both made massive changes in how we save and invest for retirement.
But, SECURE 2.0 included an extra little nugget for people who owe significant student debt.
Effective as of retirement-plan years after December 31, 2023, employers can contribute to your retirement plan amounts matching not just what you contribute to the plan, but also your “qualified” student loan repayments.
How Does the SECURE 2.0 Student Loan Match Work?
As with many other complicated laws, not all the details are clear from the get-go, but here’s what the relevant section, number 110, says.
Its purpose is to help employees who may be unable to save for retirement because their student debt is overwhelming, so they miss out on employer matching of retirement-plan contributions they can’t afford to make.
Section 110 thus allows employers to provide such matching contributions based on the employee making student loan payments. This applies to 401(k), 403(b), SIMPLE IRA, and (for government employees) 457(b) plans, with respect to “qualified student loan payments.”
“Qualified student loan payments” are defined broadly as repayment of any debt incurred by the employee solely to pay his or her qualified higher-education expenses.
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Example: How a Student Loan Retirement Match Adds Up
Say your employer offers a dollar-for-dollar match of retirement-plan contributions up to 6% of your salary, and that salary is $100,000.
This means you could contribute $6000 a year and get another $6000 from your employer into your retirement plan.
However, your required student loan payments are $3000, and you can’t afford to both make those payments and contribute $6000 to your retirement plan.
You can only afford $6000 in total.
As things stand now, you’d pay $3000 against the loan, allowing interest on the debt to continue to accrue per the regular schedule. You’d then contribute to your retirement plan the remaining $3000 you can afford, receiving only a $3000 matching contribution, for a total of $6000 going into your retirement plan.
As of January 1, 2024, you’ll be able to use the full $6000 you can afford to pay down your student debt faster, reducing your interest costs.
Based on SECURE Act 2.0 Section 110, your employer can then count the $6000 loan repayment as the basis for providing the dollar-for-dollar match, so you still have $6000 going into your retirement plan annually.
Once you pay off your loans, you divert the full $6000 to the retirement plan, for a total annual contribution of $12,000, including employer match.
Will Your Employer Match Your Student Loan Payments? Ask
The SECURE 2.0 Act’s Section 110 allows your employer (starting next January) to match your student loan debt repayment with the same employer-match contributions to your retirement plan account as if you’d made that payment as a contribution to the retirement plan.
If your employer offers retirement plan matches already, ask if they plan to take advantage of the new rules and expand the match to student loan repayments, helping you get more aggressive with paying off the debt, paying it off more quickly, and reducing your interest costs.
As Matt Smith, CFA®, CFP®, CIMA®, CAIA®, Founder of Concert Financial Planning says:
The ability for employers to match student loan payments toward employees’ 401(k) accounts is a potentially huge win for my clients with significant student debt, largely incurred during law school. However, it only works if the firm actually does it.
So far, we haven’t heard of this being rolled out for employees next year, but that doesn’t mean employees shouldn’t ask! An upswell of requests from employees could make this benefit a useful tool as law firms compete for the best talent. At the very least, employees should make it a topic of conversation in any employment negotiations.
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Frequently Asked Questions
Can my employer match my student loan payments in my 401(k)?
Yes, if your employer chooses to offer it. Under Section 110 of the SECURE 2.0 Act, employers can make matching contributions to your retirement plan based on your qualified student loan payments, as if you had contributed that amount to the plan yourself. The option is available in 401(k), 403(b), SIMPLE IRA and governmental 457(b) plans.
What counts as a qualified student loan payment under SECURE 2.0?
The article explains that qualified student loan payments are defined broadly as repayment of any debt the employee incurred solely to pay his or her qualified higher-education expenses.
When did the SECURE 2.0 student loan match take effect?
The provision applies to retirement-plan years beginning after December 31, 2023. For plans that run on a calendar year, that means January 1, 2024.
How does a student loan retirement match help me?
It lets you put more of your budget toward paying off student debt, cutting your interest costs, without giving up free employer money. In the article’s example, an employee who can afford $6,000 a year could send all of it to the loan and still receive a $6,000 employer match, instead of only $3,000 by splitting the money.
Is every employer required to offer a student loan match?
No. The law allows the benefit but does not require it, so it only works if your employer actually adopts it. One advisor interviewed recommends asking your employer about it, and raising it in employment negotiations, since employee demand could encourage firms to offer it.
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Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.
About the author
Contributing Writer, Wealthtender
My career has taken some unexpected turns, from earning a PhD in experimental high-energy physics, to conducting cosmic-ray research in Antarctica, to supporting NASA projects and programs, to running my own consulting business. I also run several other small businesses and help my wife run her Marriage and Family Therapy practice.
Those experiences taught me to question assumptions, think critically, and recognize that real-world decisions of any significance rarely have simple answers that apply to everyone. Today, I bring that perspective to writing about personal finance. Drawing on my analytical background, business experience, and research, I explore financial decisions, challenge conventional wisdom, and help readers understand the tradeoffs that can affect their financial well-being. To complement my own research and experience, I also weave insights from financial professionals into my articles, drawing on their expertise and real-world experience helping clients navigate financial decisions and challenges.
At medium.com/@opher-ganel, you can read more of my articles and subscribe to receive email notifications when new ones come out.