In 2022, the student debt load in the U.S. stands at approximately $1.75 trillion. Student debt can hamper people’s ability to adequately save for retirement. People across all age groups struggle to balance student debt and saving for retirement. A study conducted by CNBC and Acorn found that 81% of people with student loans have needed to delay important life goals, such as buying a home or retirement.

Americans may focus on repaying student debt over contributing to a retirement savings account, like a 401(k), but the IRS has opened the door for employers to offer a new kind of benefit. While paying off your student loans, your employer might be able to make a matching 401(k) contribution for you. New legislation could also make this option more accessible to employers.

Key Takeaways

  • In 2018, the IRS released a Private Letter Ruling (PLR) in response to an employer inquiring about 401(k) matching for student loans. The IRS ruled that the employer could make 401(k) contributions for employees who are paying off student debt and unable to make their own direct 401(k) contributions.
  • The PLR is a ruling in response to a request from a specific employer. The ruling does not automatically apply to all employers.
  • The SECURE 2.0 Act could solidify this employee benefit, allowing employers to match retirement contributions for workers who are paying off their student loans.

The IRS Ruling

The IRS released a PLR in 2018 allowing a specific employer to match employee student loan repayments with 401(k) contributions. The ruling allows that employer to make a 5% matching contribution to eligible employees’ 401(k)s. The employees must make a 2% payment toward their student loans during the same pay period.

This ruling only applies to one specific employer, but it has allowed other employers to follow suit and pursue their own PLRs.

The ruling clarified that the employer’s 401(k) matching proposal would not violate the “contingent benefit” prohibition, which bans employers from making other employee benefits contingent on 401(k) elective deferrals.


Ask your employer if they offer 401(k) matching for your student loan repayments. Some employers, like Abbott Laboratories, have started offering 401(k) matching and student loan repayment programs.

Tax Benefits

Employers can offer student loan repayment programs as a recruiting and retention tool.

The money offered through these programs is considered taxable. Employer 401(k) matching for student loan repayment offers a tax advantage over this approach to employer support for loan repayment. Contributions that employers make to employee 401(k)s are not taxable.

The SECURE 2.0 Act

The Securing a Strong Retirement Act (SECURE) 2.0 builds on the work of the Setting Every Community Up for Retirement Enhancement (SECURE) Act that became law in December 2019. The sweeping 2.0 legislation includes a provision that would allow employers to adopt programs that match 401(k) contribution with employee student loan repayment. SECURE 2.0 Act specifies
that vesting schedule for matching contributions for employee student loan payments be the
same as all other matching contributions.

If the SECURE 2.0 Act becomes law, it will ease employer compliance concerns. Without this legislation, employers have had to work with the IRS on an individual basis to establish this kind of employer program for 401(k) matching for student loan payments.

The legislation has strong bipartisan support. The House has passed SECURE 2.0 Act, but the Senate has yet to have a full vote on it.

Do all employers offer 401(k) matching for student loan repayments?

The IRS ruling released in 2018 is limited. It applies only to the employer who sent the request, but the ruling does signal other employers are welcome to explore the possibility of launching a program of their own.

Should you invest in your 401(k) if you have student loans?

Many Americans put off saving for retirement because of their student loans, but retirement planning is best started early. If you start saving for retirement early, even if you are only able to contribute a small amount to your 401(k), you have more time to take advantage of compounding.

Could the rules on 401(k) matching and student loan repayment change?

The SECURE 2.0 Act, passed by the House, would authorize linking 401(k) matching contributions to employee student loan repayment. A version of the legislation is advancing through the Senate, but it has not yet undergone a full chamber vote. If the proposed legislation becomes law, it could give all employers the basis to offer this benefit to their employees.

The Bottom Line

For now, employers that want to pursue 401(k) matching for employees repaying their student loans need to work with IRS to determine if they can launch that kind of program. If the SECURE 2.0 Act passes the Senate, all employers will have the option to offer this benefit.


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