Key facts
- A SECURE 2.0 provision allows employers to match qualified student loan payments.
- An EBRI analysis estimates this could add $11.2 billion to $20.2 billion annually to 401(k) contributions.
- One in five 401(k) participants aged 25-69 carry educational debt.
- Younger workers aged 25-29 have the highest prevalence of student loan debt at 35.7%.
- Workers with student loans participate in defined contribution plans at lower rates than those without.
- Median 401(k) account balances for participants with student loan debt are significantly lower.
A provision within the SECURE 2.0 Act that allows employers to match qualified student loan payments could significantly boost retirement savings for workers with student debt, according to an analysis by the Employee Benefit Research Institute (EBRI). The EBRI Issue Brief estimates that this feature could add between $11.2 billion and $20.2 billion annually to 401(k) contributions.
The research highlights that student loan debt impacts retirement preparation beyond the loan balance itself, affecting participation rates, contribution amounts, and overall accumulation in retirement plans. These differences persist over a worker's career.
The study found that one in five 401(k) participants aged 25 to 69 carry educational debt, with the burden highest among younger workers. Those with student loans tend to participate in defined contribution plans at lower rates and contribute less when they do participate, leading to significantly lower median 401(k) account balances compared to their peers without loans. This gap remains stable as savers age.
EBRI quantified that a substantial percentage of 401(k) participants with student loans contribute below common employer match thresholds. The SECURE 2.0 provision offers a tool for employers to help these workers build retirement savings while managing loan payments. The analysis suggests that employers should focus on younger and mid-career workers with loans when designing repayment and match programs.