Employers are hesitant to offer employees new benefits that allow companies to pay off student loans while saving for retirement, experts say.
The SECURE Act 2.0, signed into law in December 2022, includes a provision this year that allows employers to count student loan payments toward matching 401(k) and other retirement contributions for the first time. It’s designed to help Americans avoid the difficult choice of using their money to pay off student loans or save for retirement.
But lingering economic concerns, including a possible economic slowdown, could derail those plans.
Experts say companies are in no hurry to provide benefits to employees amid the uncertainty. As a result, borrowers are left wondering how to make the most of their income.
Nearly two-thirds of the companies sponsored by the American Council, a nonprofit industry group, investigated this year It said it does not offer student loan matching, and only 5% have done so or plan to do so this year. When we asked why they weren’t planning on offering this benefit, the answers ranged from cost, complexity, competing priorities, and lack of interest or need.
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Aaron Terrazas, chief economist at job site Glassdoor, said, “Compensation teams in the corporate world are currently focused on cost control, so many companies may be reluctant to consider expanding benefits.” Isn’t there?” he said.
However, he said the move could accelerate in certain industries that need to attract and retain talent, such as health care and professional services. tom armstrongVice President of Customer Analytics and Insights, Voya Financial.
What is student loan matching?
When you make a student loan payment, your company contributes to your 401(k), 403(b), or other qualified retirement account plan. The exact matching structure depends on company policy, and employees must certify each year that they have made qualifying student loan payments.
As a simple example, if your company offers a 4% 401(k) match on contributions, paying off your student loans will get you a dollar-for-dollar match of up to 4% of your salary. can do.
Note that the student loan matching program mirrors the 401(k) matching benefit, so the matching rates, eligibility, and vesting rules are the same. Vesting means you may have to remain with the company for a certain period of time or risk losing some or all of your employer match. If your retirement savings are all matched and not fully vested, you could lose some or all of your savings.
Will more companies offer student loan matching in 2024?
Voya’s Armstrong said he expects more companies to consider this benefit as we head into 2024. “There is no mass adoption, but the level of interest is increasing,” he said.
“If the student debt crisis continues to be a crisis, some form of student loan benefits will become commonplace among companies,” said Stacey McFetress, senior director of education finance at EdAssist by Bright. I don’t know if that will happen this time.” Horizons provides educational advisory services to organizations and families.
Avoidance may be the best strategy.Student loan debt: How 5 people went to school and avoided debt
Companies offer support for other student loans
Some companies already help employees pay off student loans and don’t see a need to change benefits. McFettles said employees are looking for immediate help with student loan repayments, and some are asking for direct payments to reduce their balances instead of paying into severance.
The program will allow employers to provide up to $5,250 in student loan repayment benefits tax-free by 2025. Consolidated Appropriations Act of 2021. Last October, 34% The number of employers offering student loan benefits is up from 17% in 2021, according to HR software company Paycor.
Some companies offer student loan payment counseling and third-party low- or interest-free education loans, along with debt consolidation and refinancing services.
companies like staples, fidelity, Chegg, connelly partners, Chownowand First Republic Bank We offer some of these options.
How many people can benefit from corporate student loan assistance?
Approximately 45 million Americans have student debt totaling $1.75 trillion.
After the student loan payment moratorium ended, 60% of the 22 million borrowers who had payments due in October missed their payments. According to the ministry of education.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
