There have been many changes in the past years concerning student loans, and the sad state still lingers in 2023 for student loan borrowers. There has been a recent light at the end of the tunnel in the shape of a student loan 401k match, which also benefits employers.

Now, worker retention can be enhanced by the companies that can support hiring graduates by funding their 401k match student loans.

So what is student loan matching 401k, and who can benefit from this scheme? Let's find out.

Understanding How Student Loan 401k Match Can Help in Repayment Contributions?

Before we get into the details of 401 k student loan contributions, here are some stats you should be aware of:

• Student loans are at the highest debt amount of $1.774 trillion, constituting 43.6 billion students who have this debt.
• The outstanding amount for student loan debt is currently $1.644 trillion. Almost 92.6% of all student loan borrowers are yet to clear this amount.
• Each student, on average, has $37,717 in Federal Student Loan Debt.
• If private loan debts are included in this average amount, it increases to $40,505 on average per student loan borrower.

It is a surprising amount, and individuals are hardly making ends meet due to inflation and are struggling to repay this debt. Most of these borrowers are wondering how they will be able to afford a retirement plan and buy a home.

What Would It Mean for Employers and Benefit Them?

Employers who choose to hire graduates and provide a student loan 401k match program stand to gain several advantages. This initiative assists recent graduates by allowing them to have their student loan repayments deducted directly from their salaries, making it easier for them to manage their debt. Additionally, employers benefit from potential tax deductions through this program.

Usually, loan repayment assistance is considered taxable income. However, by incorporating it into a tax-advantaged retirement plan like a 401k match, employers can potentially eliminate or reduce the tax burden associated with this benefit. This tax-saving opportunity makes it more appealing for companies to attract and retain young talent, fostering a dedicated and productive workforce over an extended period.

Is It Possible for All Employers to Offer 401k Match Student Loans?

SECURE 2.0 has recently been approved by the Internal Revenue Service, allowing your employer to make contributions easily. The process will be straightforward if you are eligible for student loan matching 401k repayment offers.

The employee "may choose to match dollar-for-dollar, or perhaps a percentage of the student loan payment," Arnold says. "There are limits on overall contributions to 401(k) plans each year, both from employees and employer matches, so the combined total contributions would need to stay under that limit."

In the long run, companies benefit immensely from this campaign if they set up student loan 401k match programs.

• New recruits and company employees will see an easy solution for their student loans, making them more willing to stay in the same company longer.
• Employees are more productive and happier if their financial troubles are taken care of, thus immensely reducing Financial Stress.
• When employees are aware that they can invest early in their retirement plans, they can support the company for longer.

For example, if you can contribute one dollar against your student loan 401k match, your company can invest 50 cents for every dollar you contribute. The investment from the company's side can be up to 6% of the worker's salary. Now, suppose you are making 60,000 a year, and 6% makes it about 3,000. With the help of this scheme, your employer can now invest up to $1,800 into your student loan 401k match account.

Should You Invest In a 401 K Student Loan?

While most of you might be putting off your retirement plans and payments until you can repay your student loans, it becomes more accessible. If your employer is offering you the repayment of your student loans, you can start retirement planning. You can now think about an act on this offer because now you get the advantage of compounding.

The purpose of this law and act was to give borrowers and the American public, in general, some leeway to start investing in retirement planning. Most individuals can now pay off their debt while saving and contributing to company retirement accounts.

When Did the Rule on Student Loan 401k Match and Student Loan Repayment Change?

The abovementioned contributions are part of the CAA Consolidated Appropriations Act 2023. It helped authorize and link SECURE 2.0 (Securing a Strong Retirement Act) with your student loan 401k match. The linkage also allows employers and companies to make it a part of their recruiting offer.

Final Thoughts on Student Loan 401k match

In this article, we shared important information regarding student loan 401k match for borrowers having difficulty returning. With the recent SECURE 2.0 act, individuals can now ask their employer to contribute to their repayment options, hence saving them trouble.

This act is a win-win situation for a company and its employees as it takes a burden off the shoulders of their workers. With such support from their employees, workers will be more productive as they are more happy now.