Debt Relief at Work: New Workplace Benefit Targets Student Loan Burden

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This week’s insight takes a close look at a new workplace benefit that helps individuals saddled with student loan debt pay down what they owe more quickly.

There are more than 40 million people carrying student loan debt, owing a collective $1.6 trillion. It sounds like a huge number, and it is, but young people and even the many borrowers in their 40s and older are, for the most part, as wealthy as ever. Stock prices are up, home values are on the mend, and income growth (even after inflation) is forecast to continue throughout 2024 while the unemployment rate hangs barely above multi-decade lows.

“Under 40” Wealth Up Nearly 80% Compared to 2019

So, if you have a chunk of student debt to be repaid, there are macro tailwinds that should allow you to wipe that out before long. New legislation may help, too, and it comes on the job. There’s an emerging corporate perk specifically for student loan borrowers with access to a 401(k) or other employer-sponsored retirement plan. Effective this year, the Secure Act 2.0 legislation – a sweeping bill that impacts many facets of financial planning – will allow workers with outstanding student loans to receive employer-matching funds in their retirement plans.

A handful of major companies have already launched this benefit with the hope of retaining key talent as the jobs market remains rather strong. Recall in January that the economy created more than 300,000 positions, almost double what economists were predicting. Moreover, so-called job-switchers keep commanding sizable salary bumps, keeping pressure on employers to step up their benefits game.

Abbott Labs was among the first major employers to pitch this to its workforce. It implemented a 5% matching contribution for employees who could demonstrate that they were putting at least 2% of their salary into paying down student debt. The match itself then goes into the individual’s retirement plan as a pre-tax employer contribution regardless of whether the person contributes on their own.

This benefit is part of a broader trend of enhanced and special help in the form of educational-related benefits. If you carry student loans, be sure to check with your employer on all that might be available to you. Other programs might include tuition assistance, tuition reimbursement, and debt counseling.