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Secure 2.0 Act: Student loan payments will count towards matching 401(K) contributions

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The newly signed Secure 2.0 Act will allow employers to count student loan payments to match 401(k) retirement contributions.

Last week, President Joe Biden signed the Secure 2.0 Act, which not only created changes to retirement savings plans, but also impacted student loan payments.

Beginning in 2024, the Secure 2.0 Act will allow employers to provide their employees with 401(k) contribution matches based on their workers’ student loan payments. In other words, student loan payments may be treated as optional deferrals or employee 401(k) contributions and therefore applicable to a company’s matching policies.

The rules behind company 401(k) matches vary across different plans. But a company typically matches a percentage of an employee’s contributions up to a maximum amount per year.

For example, some companies may match 50 cents for every $1 employees contribute to their 401(k)s up to 6% of their wages. So for people earning $60,000 a year, 6% of their salary is $3,600. If they earned that much in student loan payments each year, their employers could now invest $1,800 in their 401(k) accounts.

The law allows companies to make matching 401(k) contributions based on employees’ student loan payments, even if workers do not directly contribute to their own 401(k) plans.

If student loan debt is getting in the way of saving for retirement, consider refinancing your private student loans at a lower interest rate. Visit Credible to get your custom rate in minutes without affecting your credit score.


State of the student loan crisis

Student loan debt is a burden for many Americans and totaled more than $1.6 trillion as of September 2022, according to Council on Foreign Relations data.

The average student loan payment is estimated at $460, according to For many, these payments can prevent them from saving for retirement or investing as much as they can into retirement savings.

In fact, 84% of American adults said that student loans are negatively affecting how much they can save for retirement, according to a survey sponsored by TIAA and conducted by MIT AgeLab.

“When you know you should be saving for retirement but you’re deep in debt, it can feel like a choice or a choice,” TJ Donovan, chief executive of Morgan Stanley at Work, said in a statement.

However, the Secure 2.0 Act could make it easier for Americans who pay off student loans to have retirement savings funds with the help of their employers.

“Section 110 is intended to help employees who may not be able to save for retirement because they are saddled with student debt and therefore are missing out on matching contributions available to retirement plans,” the Secure 2.0 Act summary stated.

If you’re having trouble saving for retirement because of student debt, consider refinancing at a lower interest rate to lower your monthly payments. Visit Credible to compare loans from different lenders without affecting your credit score.


Secure 2.0 summary

The Secure 2.0 Act is a continuation of the Secure Act, which was signed into law in 2019. The Secure 2.0 is designed to make other significant changes to the retirement plan system.

Here are some highlights from Secure 2.0

  • The Minimum Required Distribution Age (RMD) will increase to 73 and then to 75 in 2033.
  • Recovery contributions to most workplace retirement plans will increase to $10,000 for employees ages 60-63 starting in 2025
  • Automatic enrollment in 401(k)s and other workplace retirement plans would become a requirement starting in 2025.
  • Part-time employees who have worked for at least two consecutive years with at least 500 hours of annual service will be eligible to enroll in their employer’s 401(k) plans.

The Secure Act 2.0 is part of the $1.7 trillion spending package that passed in late 2022.

“Passage of SECURE 2.0 is an important step in increasing the ability of Americans to improve their financial security,” said Maurice Perkins, director of corporate affairs for Transamerica, in a statement. “We have long been strong advocates for policies that help American workers increase their retirement savings and financial health. Transamerica leaders have worked with Congress and strongly supported bipartisan legislative efforts to make retirement savings easier. and more effective for employers and their employees.”

If student loan payments are getting in the way of your retirement savings strategy, you might consider refinancing your private student loans at a lower rate. You can visit Credible to see if this option is right for you.


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