Companies can now help workers pay off student debt while saving for retirement—these 3 already offer the benefit (2024)

Over 43 million Americans currently have federal student loan debt.

Though many, if not all, of those borrowers probably want to retire one day, it can be difficult to balance making your monthly student loan payment and investing for the future. In fact, 66% of borrowers said they had to reduce their retirement contributions as payments on federal student loans resumed last fall, according to a survey from Allianz Life.

But companies can now help their employees meet these goals. The Secure 2.0 Act went into effect this year, codifying the ability for employers to match workers' student loan payments with a contribution to their 401(k), 403(b) or other retirement account.

Offering a 401(k) match is a popular benefit: 98% of employers that offer 401(k) plans match some level of employee contributions, according to a 2013 survey of over 400 plan sponsors.

But employees may not be able to afford a retirement contribution, let alone one that earns them the full match, if they're overburdened with monthly student debt payments.

At least three large employers — Abbott, Verizon and Chipotle — currently offer 401(k) matching for employees making student loan payments. Here's a look at how each company's plan works.

Leading the charge: Abbott's Freedom 2 Save program

Prior to the passage of Secure 2.0, employers were technically allowed to offer matching 401(k) contributions for student loan payments, but there wasn't a clear legal pathway to do so.

When Abbott, a health-care technology company with over 115,000 employees worldwide, wanted to help its employees struggling with student debt back in 2018, the company had to get special approval from the Internal Revenue Service.

A private letter ruling from the IRS allowed Abbott to create its Freedom 2 Save benefit six years ago, which allows employees who put 2% or more of their salary toward student loans to get a 5% retirement contribution from Abbott. All employees are eligible to participate in the benefit, according to an Abbott representative. Over 2,800 employees have enrolled in Freedom 2 Save since its launch in 2018.

The program helped inspire the Secure 2.0 provision that makes it easier for companies to adopt similar plans to assist their student loan borrower workforces, according to Abbott. The company recently created a blueprint detailing the advantages of offering a student loan repayment benefit and guidance for other organizations to design their own programs.

"We've received many inquiries about Freedom 2 Save since launching the program...Interest definitely increased in the past year as people prepared for the approval of SECURE 2.0," says Mary Moreland, executive vice president of human resources at Abbott. "We're receiving positive feedback on the blueprint and know that it's being downloaded by a diverse group of companies across various industries."

Verizon: Secure Your Future

Verizon recently introduced a student loan payment match to help support its employees. Employees who enroll in Verizon's Secure Your Future program can earn up to a 6% retirement contribution match while paying their student loans.

Employees can get the full 6% retirement contribution match by making their student loan payments, making their own contribution, or a combination of the two, Kevin Cammarata, vice president of benefits at Verizon, tells CNBC Make It.

For example, an employee could put 3% of their annual salary toward their student loans and 3% toward their 401(k) and Verizon will make a 6% retirement contribution on their behalf.

"We really don't want people missing out on that 6% match for a variety of reasons, the least of which [being that] the best time [to] start saving for retirement is right away," Cammarata says.

The program launched in December and over 500 employees enrolled on the first day, according to Cammarata. Both full and part-time employees are eligible to sign up as soon as they start working at the company.

"I think [employees] appreciate both the awareness of student loans as a debt burden, but also the flexibility they have so they don't feel like they have to miss out on this 401(k) match," he says.

Chipotle: supporting a young workforce

Fast-casual restaurant chain Chipotle also hopped on the student loan retirement match train after Secure 2.0 passed. The company recently announced a new suite of employee benefits, including 401(k) matching for student loan payments.

Chipotle highlighted its young workforce as a contributing factor in its decision to add the new benefit. Over 73% of Chipotle employees are members of Gen Z, the company said in a news release. Chipotle will match up to 4% of an employee's salary through 401(k) contributions if they are making eligible student loan payments.

"Gen Z has led the charge in reshaping our society's approach to mental health, while simultaneously being cited as having the most debt," Ilene Eskenazi, chief human resources officer at Chipotle, told CNBC Make It. "By offering new benefits that support their mental and financial wellbeing, these individuals are more likely to join and grow with us."

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Companies can now help workers pay off student debt while saving for retirement—these 3 already offer the benefit (1)

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Companies can now help workers pay off student debt while saving for retirement—these 3 already offer the benefit (2024)

FAQs

Do companies help pay off student debt? ›

The idea of an employer giving you extra money to pay off your student loan debt may seem too good to be true. But in fact, around 17%1 of employers offer student debt assistance and another 31% plan to offer it in the future.

What are the new 401k rules for student loans in 2024? ›

In 2024, a provision in SECURE 2.0 takes effect that provides a new option tying student debt repayments to 401(k) plans but clearly communicating to employees why and how to opt into the new program is key to adoption.

What are 3 ways someone can minimize student loan debt? ›

Before you decide to go the loan route to cover gaps, think through these strategies:
  • Talk about how much college costs. ...
  • Choose the right school. ...
  • Start at a community college. ...
  • Test out of classes. ...
  • Skip room and board. ...
  • Take advantage of scholarships and financial aid.

What companies offer a 401k student loan match? ›

But employees may not be able to afford a retirement contribution, let alone one that earns them the full match, if they're overburdened with monthly student debt payments. At least three large employers — Abbott, Verizon and Chipotle — currently offer 401(k) matching for employees making student loan payments.

What companies own student loan debt? ›

Federal student loans are owned by the U.S. Department of Education while private student loans are owned by the financial institution that granted them.

How many companies offer student loan repayment? ›

About a third of employers (34%) currently offer some form of student loan repayment support, according to the study released this week by the Employee Benefit Research Institute (EBRI). That's up from a quarter of employers last year and 17% in 2021. EBRI surveyed 252 U.S. companies with 500 or more employees.

What is the new law for 401k and student loans? ›

A feature of Secure Act 2.0 allows employers to treat employee student loan debt repayments as if they were 401(k) contributions—and make matching contributions for qualified student loan repayments into the employee's retirement account. Student loan debt precludes many workers from saving for their retirement.

Can I use my 401k to pay off student loans? ›

You can use 401(k) funds to pay off student loans, but it usually isn't a smart idea. You may owe a penalty and lots of taxes on the amount you withdraw. Aly J. Yale is a personal finance journalist with work featured in Forbes, Fox Business, The Motley Fool, Bankrate, The Balance, and more.

Can employers match student loan payments in 401k? ›

Under the Secure Act 2.0, your employer can still make a matching contribution of up to $500 a month into your retirement account, even if you're not contributing and are paying your student loans instead. Employers can match these contributions up to $5,250 tax-free.

How to lower Sallie Mae payments? ›

If you want to lower your payment

If you're experiencing financial hardship, you could contact Sallie Mae to see if it would be willing to temporarily forbear or reduce your payments. However, this is only a short-term fix. Generally, the only way to permanently reduce your loan payment is to refinance your loan.

How much student debt is too much? ›

Regardless, one rule of thumb for student debt is that you should try not to borrow more than the first year salary you can expect in your chosen field. This means that if you expect to earn $38,000 in the first year of your career, you should try to borrow $38,000 or less for your degree.

Is there any way to lower student loan payments? ›

How to Lower or Suspend Your Student Loan Payments
  1. Switch Repayment Plans.
  2. Update Your Current IDR Plan.
  3. Get Temporary Relief: Deferment or Forbearance.
  4. Review Your Loan Forgiveness Options.

Do any companies do 100% 401K match? ›

Most often, employers match employee contributions up to a percentage of annual income. This limit may be imposed in one of a few different ways. Your employer may elect to match 100% of your contributions up to a percentage of your total compensation or to match a percentage of contributions up to the limit.

Which company has highest 401K match? ›

Making sense of the data below:
CompanyMatchVesting
GoogleUp to IRS limit, or $3,000 matchImmediately
Honeywell International7% of compensationImmediately
Adobe6% of compensation2 years
Netflix4% of compensationImmediately
31 more rows
Jan 16, 2024

Does McDonald's match 401K? ›

At McDonald's we are here to find a schedule that serves you. We offer a 6% employer match on 401K contributions and insurance benefits to our team members who work an average of 30 or more hours/week after one year — Health, Dental, Vision, Life, Short-Term, and Long-Term Insurance.

What employment qualifies for student loan forgiveness? ›

As a full-time government employee (federal, state, local, or tribal), you're eligible for PSLF. You could even be eligible for PSLF as a government contractor, so long as you're directly employed by a qualifying employer — such as a nonprofit — that is doing work under a government contract.

Do government jobs pay off student loans? ›

Federal student loan repayment program

Under this program, the federal agency you work for will repay up to $10,000 per year of eligible federal student loans, including: Direct Loans, including Direct Subsidized and Unsubsidized Loans, PLUS Loans, and Direct Consolidation Loans. Federal Family Education Loans (FFEL)

Can you get student debt forgiven? ›

Only federal Direct Loans can be forgiven through PSLF. If you have other federal student loans such as Federal Family Education Loans (FFEL) or Perkins Loans you may be able to qualify for PSLF by consolidating into a new federal Direct Consolidation Loan.

Does Target help with student loans? ›

Target has partnered with Guild Education to be able to provide its team members with tuition assistance and reimbursem*nt. Access this Guild Education page specifically for Target employees to begin your studies. All you have to do is create an account to gain access to Target's academic programs.

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