Fidelity offers new benefit to support SECURE 2.0 student loan provision

With student loans a never-ending financial albatross for millions of employees, employers are acknowledging the necessity of stepping in to help. 

Despite recent federal efforts to forgive student loan debt, and increasing awareness of the financial and mental toll this burden is having on employees, the average worker is still shouldering more than $37,000 in student loan debt, according to the U.S. Department of Education. In February, Biden forgave an additional $1.2 billion for borrowers, bringing the total amount of debt forgiveness to a staggering $138 billion. Yet that's merely a dent in the nearly $1.74 trillion borrowers still owe. 

Read more: Understand SECURE 2.0's student loan provision to help employees with debt

For employees, the immediate need to pay off their loans is interrupting valuable opportunities for them to save for their longer-term goals: According to Fidelity, 67% of recent college graduates say their debt is preventing them from saving for retirement. This is an unfortunate reality, especially considering younger employees have the benefit of long-term compound interest that could help their nest eggs grow. 

"When you are heavily burdened by a liability that you have to pay month-to-month, that may preclude you from taking those longer-term saving steps," says Amanda Hahnel, vice president and head of student debt retirement at Fidelity Investments. "That means you're going to forgo long-term investment returns and accruals, and you can't make that up later on." 

Sixty-seven percent of organizations already offer a student loan repayment benefit, according to the Employee Benefit Research Institute, and a provision within SECURE 2.0 enables employers to make a matching contribution to an employee's retirement account, while the employee simultaneously pays off their loans. Yet while these efforts are beneficial for employers and employees alike, it could be an administrative headache to implement into an existing plan, Hahnel says. 

Read more: Scared of student loan matching via SECURE 2.0? Drop these common misconceptions

To support the implementation of the student loan repayment provision outlined in SECURE 2.0, Fidelity recently introduced a new benefit, Student Loan Retirement, that manages administrative and record-keeping tasks, while also offering employees much-needed financial guidance. 

"We make it easy, fast and secure to help employers determine who's eligible for the benefit, which loans actually qualify for student loan payments that are being made, and even help them with the match calculations at the end of the year," Hahnel says. "They don't have to deal with payroll, they don't have to do any of the things that go along with developing expertise in these kinds of programs. Instead it becomes part of their ongoing plan." 

The new benefit could provide over 1.2 million Americans with access to retirement savings, according to Fidelity data. Additionally, the benefit is expected to double retirement balances for those with student loan debt. 

"Getting involved early can introduce retirement plans to those that it may have been inaccessible to before," Hahnel says. "This benefit is going to be the best case scenario for employees and employers as they go through and really think about the best way of reducing the burdens that employees are facing." 

Read more: How to reach retirement regret-free

Hahnel acknowledges that HR leaders are already overloaded with managing benefits and communicating their value to employees. Working with a third party to take some of the weight off frees employers up to focus on their benefit communications instead.  

"It makes it a lot easier when employers work with a third party, so they can focus on the value of telling employees about the great benefits they're providing and help them take advantage of that," she says. "Employers are feeling a particular affinity to helping solve this problem." 

It's not easy to navigate complex financial situations like student loan debt and retirement. But there is light at the end of the tunnel when benefits align, Hahnel says. 

"There are a lot of things out there to help manage your student loans and understand how they fit in with the broader financial picture," she says. "If you're monitoring that progress and looking at the next steps, it can make it feel a little bit less hopeless, where I think a lot of people have been for a while on student debt."