Large Companies Are Offering a New Benefit to Student Loan Borrowers. Small Businesses Should Hop on Board

Companies that regularly hire young professionals know they’re burdened with student loan debt. That’s why many large employers are taking advantage of a new benefit to help employees with student loans contribute to their 401(k) plans. Small businesses hiring Gen Z employees may want to follow suit.

The benefit was made possible through the Secure 2.0 Act, which became law in December 2022 and took effect this January. It adds a slew of new retirement-related provisions aimed at helping workers save more. One allows student loan payments to count as contributions to retirement plans, enabling small employers — those with fewer than 100 workers — to match up to $5,250 annually as part of their company 401(k) contributions. 

However, small businesses aren’t the only ones implementing these benefits. This January, New York City-based insurance company Guardian, which has 7,700 employees, implemented a benefit very similar to the one outlined in Secure 2.0: Employees who were previously unable to use the company’s 401(k) match now have the chance to receive contributions from the company while paying down debt.

“Employers who prioritize their workers’ financial well-being, such as by alleviating student loan burdens, are better positioned to build happier, more productive workforces, as well as attract and retain talent,” says Eric Silver, head of retirement and deferred compensation programs at Guardian. While the response so far has been positive, the company notes that it’s too early to tell how many employees will be taking advantage of the benefit.

Guardian isn’t the only large company to use the benefit as a proverbial dangled carrot. Last month, Chipotle promised to start matching student loan payments, in addition to offering other benefits such as financial planning and mental health services, in an effort to attract the 19,000 employees it needs for the busy season. 

“The student loan retirement match will bring millions of people off the retirement savings sidelines,” says Laurel Taylor, co-founder and CEO of Candidly, a New York City-based student debt and savings platform. “For employers, it’s an opportunity to reach an employee population that is financially stressed and, therefore, less likely to participate in a retirement plan and more likely to churn.”

In October 2023, millions of student loan borrowers were once again required to start making payments after Congress halted them for years during the pandemic. According to data from the Department of Education, only 60 percent of the 22 million borrowers who had student loan payments due by mid-November paid them on time.