The IRS just changed the game for student loan benefits

by vault | Sep 10, 2018

What if I told you that a relatively slight modification to your company’s existing 401(k) program could drastically improve employee participation rates while also chipping away at two of America’s crippling financial issues?

According to a recent game-changing IRS private letter ruling, one company was approved to do just that—and so can yours.

Consider this: Americans collectively hold a massive $1.4 trillion in student loan debt. To put this in perspective, total American credit card debt is $0.8 trillion. Now here’s another number for you. A staggering $24 billion in 401(k) employer matching contributions is left unused annually. The latter is, in large part, due to the former. Pew revealed that only 52% of Millennials participate in employer-sponsored retirement plans. It makes sense: employees burdened by student debt aren’t always able to make student loan payments and also contribute to 401(k) match plans.

So they don’t.

But—thanks to the new IRS ruling—employees of any participating company who are unable to contribute won’t have to forfeit saving for retirement. Here’s how it works: the participant simply agrees to allocate at least 2% of their salary to student loan payments, and their employer, in turn, contributes a generous 5% to their 401(k) fund. This is a generous percentage, of course—it’s important to note that each student loan benefits program can be structured individually between a company and its benefits program sponsor. Since it’s an elective benefit, employees without student debt or who prefer traditional plans aren’t affected.

It’s time more companies make a similar move to better allocate untapped 401(k) match funds.


By implementing a student loan benefit, employers gain an advantage in attracting top talent fresh out of top universities, as well as well-established professionals still working to pay-off student loans.

Employees who were previously unable to build retirement savings due to student loan payments are now able to do so.

And benefits program sponsors, such as T. Rowe Price and Prudential, will have more funds coming into their accounts.


One of the biggest obstacles in the way of student loan benefits programs becoming more commonplace is IRS restrictions and rules, which don’t account specifically for student loan benefit programs.

But as more companies have pushed to implement them, the IRS has finally addressed what is and isn’t legal from a tax code standpoint. And while a private letter ruling only directly applies to the submitting company, this bodes well for other companies looking to submit a similarly designed benefits program for approval to the IRS.

And if your company is considering a students loan benefits program, you don’t have to do it on your own.

Ready to be a game changer? We can help.

Vault (formerly Student Loan Genius) offers complete student loan benefits program management. We help you decide which plan best fits your company and help implement the program. That means we help make the amendment to an existing 401(k) plan, verify employee student loan payments, and coordinate with 401(k) sponsors.


by vault | Sep 10, 2018

by vault | Sep 10, 2018

by vault | Sep 10, 2018

Student loan repayment can now be offered tax-free.
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