SECURE Act 2.0 & employer student loan matching: Qualifications & more

Deciding between paying your student loans and saving for retirement is a conundrum for many younger workers. Choosing to divert some of your paycheck to retirement can be hard to do when you also feel like you should use that money to pay off student loan debt. Thanks to a SECURE Act 2.0 student loan provision that recently took effect, your employer may offer you a better chance of doing both.

The recent federal legislation known as the SECURE Act 2.0 offered a game-changing move to help employees save for retirement and pay down student loan debt. Now, when you make student loan payments, your employer will have the option to match those payments as if they were payments to a qualified retirement plan (similar to how a 401(k) match works).

This change allows eligible employees of employers who choose to offer this match to make saving for retirement a priority and not miss out on matching contributions for their retirement plans.

The part of the Secure Act 2.0 that allows employers to match student loans went into effect on January 1, 2024. It is optional for employers to offer this match to their employees.

Your loan payment must be for a qualified student loan (according to IRS guidelines) that was taken out to pay for higher education costs—like tuition, fees, books or expenses—for you, your spouse or a dependent. Loans used for expenses like room and board, non-credit courses and sports are not eligible.

The student must have been enrolled at least half-time in a program that leads to a certificate or degree. There is no requirement that the student must graduate.

Check with your employer to find out if they have a matching program for their retirement plan and if they will be offering to match student loan payments as well. If they do match, find out what documentation they need for your loan payments to match them when the option becomes available.

It's important to discuss these SECURE Act 2.0 changes as well as the other significant changes in the law with an experienced professional. Consider reaching out to a local financial advisor to learn more about the legislative updates and how you can use them to optimize your financial future.