IRS will allow employers to match their employees’ student loan repayments

The IRS is setting up a framework for companies to match their employees’ student loan repayments in the same way companies match 401k contributions. This will be cost neutral for the employer.

Edit: the employer’s match would go into the employee’s 401k account.

According to the article, employees with student loan debt accumulate 50% less wealth in their retirement plans (by age 30) than their peers without student loan debt. I think most of us with student debt have at one point or another felt “behind”.

Thoughts? This is definitely a cool idea and would be a great hiring incentive/perk.

Edit 2: due to the popularity of this post, I wanted to remind everyone of some of the rules on our sub.

We don’t allow: • Moralizing issues • Petitions • Political discussions • Political baiting • Soapboxing

This is meant to be a discussion of personal finance, debt, and retirement savings, not a meta review of the pros and cons of capitalism. Please keep things on topic.

Edit 3: Since a lot of people are confused, I’ll explain how a 401k match works. A 401k is a retirement savings plan that came into popularity as pensions fell out of the mainstream. The 401k is a tax-efficient vehicle to invest your money for retirement. Like the pension, employers can contribite to their employees’ 401k plans as a benefit. This is usually done via a matching mechanism: I contribute 4% of my paycheck, and my employer matches that amount. Matches are almost always capped.

With the method laid out in the article, you would be able to make qualified student loan payments and have your company match that amount as a contribution to your 401k, up to a certain amount. So say you make $2000 per month, your employer matches 5% of your 401k contributions, and your monthly minimum loan payment is $1000 (in this example, you have a lot of debt). You aren’t contributing to your 401k currently. If your company chose to take advantage of this program, they would put $100 ($2000*0.05 match) in your 401k each month you made a payment on your student loan.

This doesn’t “hurt” people without loans. This is only subsidized by the government insofaras the 401k is tax-sheltered (you still pay taxes on that money), and this doesn’t constitute your company paying your loans. Participation isn’t compulsory.