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Employer 401(k) Matches for Student Debt Repayment: Killing Two Birds with One Stone?

Author

Listed:
  • Vanya Horneff
  • Raimond Maurer
  • Olivia S. Mitchell

Abstract

Almost 50 million Americans are burdened by the need to repay almost $2 trillion in student loan debt, while at the same time having to save for retirement. This article analyzes the potential impact of the 2022 SECURE 2.0 Act reform which permits employers to match contributions for student loan repayments, in 401(k) plans. Our calibrated lifecycle model measures the impact of this reform on heterogeneous households’ financial behavior and welfare. We show that, post-reform, employees will repay more loan debt but reduce own retirement plan contributions, offset by higher employer-matching contributions that take loan repayments into account.

Suggested Citation

  • Vanya Horneff & Raimond Maurer & Olivia S. Mitchell, 2024. "Employer 401(k) Matches for Student Debt Repayment: Killing Two Birds with One Stone?," NBER Working Papers 32443, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32443
    Note: AG
    as

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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