Paying Student Loans Instead of Saving? Your Employer May Be Able to Match Those Payments in a 401(k)

Should you put money into a 401(k) or use it to pay off your student loan? It’s a question many recent graduates navigate, but a relatively new rule offers an answer.

A provision from SECURE 2.0 introduced in 2024 lets employers treat student loan payments like retirement contributions for matching purposes. It offers the best of both worlds, but it’s important to know how it works before committing to it.

What is a student loan 401(k) match?

A student loan 401(k) match is when an employer makes a matching contribution to an employee’s retirement plan based on student loan payments. This match can take place even if a borrower pays the student loan and doesn’t contribute their own money to their 401(k) plan. It can apply to 401(k) plans, 403(b) plans, SIMPLE IRA plans and governmental 457(b) plans.

You’re not required to enroll in this option if you have a student loan. Some people prefer to max out their employer-match contributions by increasing their 401(k) contributions. Employers also aren’t required to offer this option and must add the feature to their plan.

Why this matters for borrowers who feel forced to choose

This option gives workers who feel like they can’t make regular 401(k) contributions due to student debt a viable route to building their nest egg.

Growing your 401(k) lets you benefit from compounding that can provide more financial flexibility as you get closer to retirement age. Student loan debt in the U.S. totals $1.83 trillion, and the average federal student loan debt balance is $39,547, according to the Education Data Initiative, a nonprofit resource for borrowers and researchers. At the same time, roughly 4 in 10 U.S. adults say they aren’t confident they’ll have enough income and assets to last throughout their retirement, Pew Research found at the end of last year. The student loan 401(k) match offers student loan borrowers a way to tackle both the goal of paying off their debt and the long-term goal of retiring comfortably at once.

How to find out if your employer offers it

To determine whether the match is an option for you, ask your HR department or the 401(k) plan administrator. You should ask if the retirement plan offers a qualified student loan payment match under SECURE 2.0. You can also get instructions on how to certify payments and enroll to receive the match.

It’s also a good idea to ask if the same math applies to 401(k) matches and student loan matches. This is still a relatively new rule, so not every employer will have it. But asking could make a significant difference for your finances if it is available to you.