Student debt has long been a major financial burden for many Americans, hindering their ability to save for retirement. However, a new provision in the Secure 2.0 Act of 2022 offers a glimmer of hope. This provision allows employers to match their workers’ student loan payments with contributions to their retirement plans. With outstanding student loan debt in the U.S. surpassing $1.6 trillion, this new policy has the potential to alleviate the financial strain on individuals and enable them to save for their future.

The average loan balance at graduation has tripled since the 1990s, reaching $30,000 from $10,000. Shockingly, around 7% of student loan borrowers now find themselves in debt exceeding $100,000. These numbers highlight the severity of the student debt crisis and the urgent need for innovative solutions.

The catalyst for this positive change was Abbott, a medical device and healthcare company, whose 401(k) matching program for student borrowers paved the way for the new policy. Mary Moreland, the executive vice president of human resources at Abbott, recognized that “many employees paying off their student loans are having trouble saving for the future.” With the initiation of the “Freedom 2 Save” program, Abbott demonstrated its commitment to supporting its employees’ financial well-being.

The Power of Abbott’s Program

Abbott’s 401(k) match to student loan payments was the first of its kind. The company obtained a private ruling from the IRS, enabling them to launch the benefit in 2018. This unique advantage meant that other organizations interested in similar programs faced significant barriers. However, the recently enacted Secure 2.0 Act removes these obstacles, making it possible for other employers to implement comparable initiatives without requiring special dispensation.

While the new law provides opportunities for employers to adopt student loan matching programs, it may take time for the concept to gain momentum across the job market. Higher education expert Mark Kantrowitz suggests that individuals interested in this burgeoning benefit should approach their company’s human resources department and express their interest. By generating enough demand, employees can influence their employers to consider implementing similar programs.

Sharing Abbott’s Blueprint

Moreland recommends that employees who hope to see the benefit adopted at their company share Abbott’s “Freedom 2 Save” blueprint, available on the company’s website. This blueprint provides comprehensive information on how the program operates and serves as a guide for developing and implementing similar initiatives. Each company is free to establish their own contribution rates, enabling them to tailor the program to their specific workforce and financial capabilities.

Employers will likely decide whether to match either student loan payments or retirement contributions, but not both. If an employer already offers a 401(k) match, it is unlikely that they will increase the rate even if they introduce the student loan matching benefit. Kantrowitz highlights that employees are not required to prove their student loan payments; they simply need to sign a document attesting to their commitment.

A Comprehensive Approach

The new law allows employers to match workers’ payments on both federal and private loans, offering a comprehensive solution to the student debt crisis. However, individuals should be mindful that pausing their 401(k) contributions to focus on paying down their debt may result in a slightly higher tax obligation, as these contributions are pre-tax and lower the taxable income.

The inclusion of student loan matching programs in retirement plans represents a significant development in the fight against the growing student debt crisis. By addressing the financial challenges faced by employees, employers have the power to positively impact the retirement savings landscape. As more companies adopt these programs and spread the word, the burden of student debt may gradually become more manageable, allowing individuals to regain control of their financial future.


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