What Is a 401(k) Student Loan Match?

What Is a 401(k) Student Loan Match?

For the first time ever, employers can match employee contributions for their retirement accounts not based on what the employee elects to contribute to that account, but on what they pay toward their student loans. You can, but don't have to, contribute anything to your workplace retirement account to be eligible for this benefit.

Why this new option? In 2022, Congress passed the SECURE 2.0 Act, as a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. President Biden signed SECURE 2.0 into law in late 2022, though many of its provisions have been—and will be—rolled out gradually over time.

One provision, Section 110, allows employees to receive employer matches to retirement accounts when they make qualified student loan payments. This option, according to the legislation's official summary, is "intended to assist employees who may not be able to save for retirement because they are overwhelmed with student debt, and thus are missing out on available matching contributions for retirement plans."

SECURE 2.0 permitted this provision to go into effect at the beginning of 2024, but the IRS didn't release guidance until August 2024. For that reason, many retirement plans are waiting to launch this option until January 1, 2025.

In the past, workers with student loan payments often faced a choice of whether to prioritize progress on those loans or save for the future. They also missed out on any employer matches if they didn't contribute to their company's 401(k) plan. The new provision is designed to incentivize workers to continue paying off their student loans on schedule, while making it easier to save for retirement.

Learn more >> Student Loan Repayment: Everything You Need to Know

How Does a 401(k) Student Loan Match Work?

Interested in getting this new perk? Since it's optional, not all employers offer it—and even companies that plan to offer it may not have a system in place for it yet. Companies that decide to offer this benefit must follow federal laws and guidelines, but certain things are left to their discretion. For example, companies decide how much they will match 401(k) contributions and what vesting schedule they use, and how they'll require certification of loan payment.

Ultimately, you will opt into this match program at open enrollment (or otherwise if offered) and provide requested documentation. This typically includes:

• Details about your loan payment, such as the amount, date, and proof of payment
• Evidence to confirm it is your loan and you made the payment

Your employer will deposit your match in your retirement account up to the annual contribution limit, provided you prove annually that you went on to make the payments. The annual contribution limit for 401(k)s for 2025 is $23,500.

The details of how exactly it works will depend on the way your employer sets up their matching program and what formula they use. Also, an employer must provide the matching 401(k) contribution at least annually, but they may choose to provide matches more frequently, such as quarterly.

While the process and details for a match will vary by employer, here are some important things to know before you sign up.

It Needs to Be Offered by Your Employer

This new 401(k) student loan match is optional; companies can offer it to attract and retain workers, but they're not required to provide this option.

If you have a full-time job and your employer offers retirement account matches, inquire if your company will offer a student loan match option. Note that the new option doesn't only apply to 401(k) plans; other eligible account types include 403(b), governmental 457(b) and SIMPLE IRA plans.

Should your employer not offer it yet, there's no harm in speaking to human resources and requesting it be added to the workplace benefits package.

Your Loan Payments Must Be Eligible

If your employer offers this match, there are some rules for what's considered a qualified student loan payment, and some restrictions on what employers can do:

• The student loans can be federal or private.
• It can be for your student loan, or payments you make on your spouse's or child's loans—as long as you're legally responsible for those accounts. In other words, a student loan solely in your spouse's or child's name may not be eligible.
• Only loan payments made in the course of the plan year can count for matching for that year.
• Employers may not limit which student loans count toward the match if they're eligible for a match at the federal level. For example, your workplace can't make a rule stating that they'll only match contributions for loans for a specific degree program, individual school or ones that further only your own education.

You Must Meet Certain Requirements

Due to their tax advantages, retirement accounts such as 401(k)s have annual contribution limits. The same limit applies, whether your maximum allowable contributions are made via retirement contributions or student loan payments. (You can pay more on your student loans; you'll just only be able to count what you paid up to the annual 401(k) contribution limit for the purpose of receiving a match.)

If you utilize this benefit, you must provide certification to your employer every year that you made your loan payments.

Learn more >> IRA vs. 401(k) Contribution Limits for 2025

Other Things to Be Aware Of

Note that if you use the 401(k) student loan match, the employer must offer the same vesting schedule as if you obtained a match through retirement contributions.

Additionally, the government's rules for this new match require that employers must offer it uniformly to all employees and may not discriminate in how the benefit is offered.

Benefits of a 401(k) Student Loan Match

While this new option might not be ideal for everyone, it could offer some important perks, including:

• More flexibility: Previously, employees with student loans had to make the difficult decision of whether to prioritize paying off their loans or save for retirement; this might mean choosing one over the other, or not putting as much toward either goal as desired. The 401(k) student loan match is the best of both worlds, allowing employees to continue making progress on their loans while still getting the benefit of matched retirement contributions.
• No more missing out on matches: Some employers offer generous retirement account matches to their employees, which is essentially free money, as an incentive to contribute to their 401(k)s. However, workers with student loans that kept them from being able to set aside part of their paycheck for retirement missed out on this freebie. This new match program is a win-win.
• Benefits more than just you: The IRS counts a qualified student loan payment as a higher education expense incurred by the employee, their spouse or a dependent when the debt originated—as long as you are legally responsible for the loan payments. In other words, this benefit is available if you're liable for and make payments on your spouse's or adult child's student loans.
• Less stress: Fidelity research has found that among workers, student debt is a major cause of stress and can negatively affect their emotional wellbeing. If an employee utilizes this 401(k) student loan match, it can help boost both their financial and overall well-being.

The Bottom Line

This new benefit created by the SECURE 2.0 legislation is optional, and not all employers will offer it. But if you're saddled with student debt and behind on retirement savings, this perk could be a massively helpful way to get back on track. Don't be afraid to encourage your employer to begin offering this option, and know that when you're on the job hunt, this is a benefit that may be worth factoring into where you apply.