U.S. companies offer student loan matching for 401(k) retirement savings
NEW YORK, UNITED STATES — For many employees, the choice between paying student loans or saving for retirement is an unfortunate reality. But a new corporate benefit is aiming to help workers tackle both priorities simultaneously.
More than 100 companies have partnered with Fidelity Investments to roll out a program that allows employers to apply an employee’s student loan payments toward receiving a 401(k) matching contribution. The provision was enabled by the Secure 2.0 Act that took effect this year.
Employee perspectives on the new benefit
James Bryant, a 37-year-old call center manager at Verizon Communications, has found it challenging to maximize his retirement savings while juggling student loans, living costs, and supporting his parents financially.
Despite Verizon offering a generous 401(k) match of up to 6% of his salary, Bryant hasn’t always contributed enough to secure the full match since joining the company in 2016.
“There have been times I didn’t take full advantage of the match,” Bryant told Bloomberg.
“My parents probably didn’t save the way they should’ve throughout their lives, and I worry I’m kind of repeating that same cycle.”
Bryant graduated in 2008 with about $75,000 in student debt.
Meanwhile, for employees like Christi Houchins, vice president at Synchrony Financial, the program has been a game changer.
She was relieved when her company rolled out student loan matching this year as she and her husband work to pay off $139,000 in combined debt.
“It felt like divine intervention,” Houchins said. “I am not going to miss out” on retirement savings while aggressively paying down loans.
Slow adoption but growing interest from employers
While over 100 companies have signed on with Fidelity, adoption of the student loan matching benefit has been relatively slow so far.
A survey by the Plan Sponsor Council of America found that 64% of companies don’t plan to offer it, citing costs as a major reason. Moreover, research by the National Bureau of Economic Research suggests that while such benefits might accelerate loan repayments, they are unlikely to significantly boost retirement savings.
Tony Guadagni, a human resources director at Gartner Inc., notes that employee demand for student loan support is rising, potentially giving employers a competitive edge in recruiting. Yet, he acknowledges that not all employees will opt for the benefit, as some do not have student loans or can afford both loan repayments and 401(k) contributions.
At Abbott Laboratories, less than 5% of employees participate in their in-house student loan 401(k) match program, Freedom 2 Save, compared to 92% using the traditional plan. Mary Moreland, executive vice president of human resources, suggests that the lower participation isn’t indicative of the program’s value but rather shows that not every employee needs this particular benefit.
