Dive Brief:
- When it comes to retirement savings, workers with student loan debt are falling behind those without it, research released Tuesday by the Employee Benefit Research Institute found.
- Many sacrifice retirement contributions to pay off student loans, even failing to hit common employer matching thresholds. Among 401(k) participants with student loans, 39% contributed less than 4% of their income, half contributed less than 5%, and 61% contributed less than 6%, EBRI reported.
- EBRI looked at a potential way for employers to help: universal adoption of a student loan retirement matching program. The program, the report estimated, could bring in matching contributions of between $11.2 billion and $20.2 billion for participants ages 25-69, depending on the maximum matching threshold (4% versus 6%).
Dive Insight:
The SECURE 2.0 Act of 2022 for the first time allowed employers to match eligible employee payments on student loans.
A senior benefits manager at eBay previously said it was “kind of a no-brainer” for the company to offer matching funds after the act’s passage. The company already budgeted for all employees to get the full matching contribution in their retirement plans and had a 96% participation rate, meaning the new offering wasn’t a big expense.
“For employees working to pay down student loan debt while also trying to prepare for retirement, access to an employer match can make a meaningful difference,” said Laurel Taylor, founder and CEO of financial wellness company Candidly, which helped fund the research. “Student loan retirement matching programs can provide another way for employees to build retirement savings while meeting an important financial obligation, rather than feeling that one financial priority must come at the expense of the other.”
Twenty percent of 401(k) plan participants ages 25–69 have student loan debt, with younger workers more likely to have greater levels of debt, EBRI found. Those with student loan debt generally contributed at lower rates, and “lower median balances among student loan borrowers persisted across all income and tenure levels.”
“The fact that these differences appear to persist over time highlights the interaction of student loan payments and retirement savings over a worker’s entire career,” Craig Copeland, director of wealth benefits research at EBRI, said in a statement.