Student loan debt is quietly draining retirement readiness for millions of American workers and a provision already embedded in federal law may be one of the most significant tools plan sponsors have yet to fully deploy.
New research published by the Employee Benefit Research Institute (EBRI) in Washington, D.C., quantifies what many advisors and plan sponsors have suspected. Workers carrying student debt participate less in 401(k) plans, contribute at lower rates, and accumulate far smaller account balances than their debt-free peers; gaps that persist and, in some cases, widen over time.
The study, "Understanding Who Would Benefit From a Student Loan Retirement Matching Program and by How Much," is the first in a two-part EBRI series examining the intersection of student debt and retirement preparedness.
Among 401(k) participants in their 40s (the cohort with the most severe gap) median retirement account balances were approximately 45 percent lower for those with student loan debt than for those without it, according to the EBRI report authored by Craig Copeland, Ph.D., director of wealth benefits research at EBRI.
That deficit does not close with age and longitudinal analysis of the same participants over the 2019–2023 period found that workers carrying student loans continued to fall short even into their 50s and 60s, with balances roughly 30 percent below those of their debt-free counterparts.
"Student loan debt can have an impact on retirement preparation that goes well beyond the size of the loan balance itself," Copeland said. "This research shows the differences between those with and without student loans in participation in 401(k) plans, how much is contributed and ultimately how much is accumulated in these plans. The fact that these differences appear to persist over time highlights the interaction of student loan payments and retirement savings over a worker's entire career."
Student loan debt in the United States reached $1.66 trillion by the end of the first quarter of 2026, according to the Federal Reserve Bank of New York, up from $360 billion in 2005.
The EBRI data, drawn from the EBRI/ICI 401(k) Plan Database linked with anonymized TransUnion credit data, found that roughly one in five active 401(k) participants between the ages of 25 and 69 carried student debt during the 2019–2023 period.
The burden falls heaviest on younger workers: 35.7 percent of participants ages 25–29 held student loan debt, compared with 20.8 percent of those ages 40–44 and 12.9 percent of those ages 55–59.
The retirement savings gap begins at the point of entry. Among workers ages 25–34 who were eligible for a defined contribution plan, 75.5 percent of those with student loans actually participated, compared with 84.1 percent of those without.
As InvestmentNews has reported on the chilling effect student debt has on employees' retirement planning, the pressure borrowers feel to prioritize loan repayment over saving tends to be self-reinforcing across the career.
Among those who do participate, the shortfall continues. Median contribution rates for borrowers lagged debt-free participants across every age group examined, with the largest gap (14.7 percent lower) appearing among those ages 50–54.
The disparity held across income brackets as well, with the widest difference recorded for the $100,000–$199,999 income group, where borrowers contributed a median 23.4 percent less than non-borrowers.
The employer match represents the leverage point where plan sponsors can intervene most directly. EBRI found that 61.3 percent of 401(k) participants with student loan debt contributed below the 6 percent threshold that many employers use as their maximum match level. Nearly 40 percent contributed below the 4 percent threshold. For every dollar those workers contributed up to the matched amount, EBRI estimated the median employer match would be between $0.60 and $0.70. That is match money being left on the table — and compounding at zero — while borrowers service their loans.
The SECURE 2.0 Act of 2022 addressed this directly by allowing plan sponsors to make matching contributions to 401(k) accounts based on qualified student loan payments, without requiring employees to make elective deferrals.
The provision, effective for plan years beginning after December 31, 2024, means a worker who puts $500 toward a student loan payment can receive a retirement match on that amount as if it were a 401(k) contribution.
As InvestmentNews covered when the IRS issued interim guidance clarifying how employers can implement 401(k) matches tied to student loan payments, the operational framework for the program is now clearer but what remains is plan sponsor adoption.
EBRI estimates that universal adoption of a student loan retirement matching program could generate between $11.2 billion and $20.2 billion in annual additional 401(k) matching contributions, depending on whether the assumed maximum matching threshold is 4 or 6 percent of compensation.
Those figures are expressed in 2025 dollars and include both current participants contributing below the match threshold and eligible non-participants who hold student loan debt.
"For employees working to pay down student loan debt while also trying to prepare for retirement, access to an employer match can make a meaningful difference," said Laurel Taylor, founder and chief executive of Candidly, which provided funding for the EBRI research. "This research helps quantify the scale of the challenge facing workers and employers. Student loan retirement matching programs can provide another way for employees to build retirement savings while meeting an important financial obligation, rather than feeling that one financial priority must come at the expense of the other."
Advisors who focus on retirement plan consulting should take note that the workers most likely to benefit (younger borrowers furthest from retirement) also stand to gain the most from compounding. EBRI found that 68.3 percent of participants ages 25–29 with student debt contributed below the 6 percent threshold, the highest share of any age group examined.
InvestmentNews recently explored how advisors are helping clients manage student loan debt alongside retirement goals at graduation season with the advice channel increasingly engaged on this issue. Whether clients are plan sponsors evaluating benefit design or employees trying to close a savings gap, the EBRI data provides unusually precise numbers to anchor those conversations.
A second EBRI study will use the institute's Retirement Security Projection Model to estimate the long-term impact of student loan matching programs on retirement income adequacy.
Full findings from the September 15, 2026, report are available at ebri.org.
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