• Rising Student Loan Defaults Prompt Employer Intervention With over 5 million Americans in student loan default, the federal government is intensifying collection efforts. Financial services companies including Charles Schwab and Fidelity Investments now offer benefits for employers to help workers pay off loans.
• Employer-Sponsored Student Loan Assistance Gains Traction The increasing prevalence of employer-sponsored student loan assistance reflects a broader trend of integrating financial wellness into employee benefits
• Retirement Matches Now Tied to Loan Payments Thanks to SECURE 2.0, companies can now match 401(k) contributions based on employees’ student loan payments, supporting debt and retirement goals.
The government is done playing nice with delinquent student loans, but companies are offering new options to help employees fulfill their debt obligations while saving for retirement.
In the latest example, Schwab Retirement Plan Services has increased student loan resources available to 401(k) plan participants through a partnership with student loan and education benefits platform Candidly.
One option offered through the partnership is increasingly popular: a new 401(k) student loan match, where the employer contributes to an employee’s retirement account when the worker makes a qualified student loan payment. Advocates say such programs, permitted under SECURE 2.0, may help mitigate an expected tidal wave of defaults as the government cracks down on delinquent student loan borrowers.
Fidelity Investments also offers a program to employer clients that can help workers with student loans. Its Student Debt Direct benefit, launched in 2018, lets employers make payments directly to employees’ student loan service providers. The program can reduce loan payoff time by more than 3 ½ years, and employers have used it to make almost 2 million payments totaling almost $500 million toward paying down employees’ student debt, the company tells Rethinking65.
In early 2024, Fidelity introduced its Student Debt Retirement benefit, a 401(k) student loan match. Over 100 companies have implemented the benefit, and “many more” are showing strong interest in offering it in 2025, Fidelity reports. Clients using the service include heavyweights Kraft, Workday and Newscorp, but interest in the benefits is increasing across all sectors, Fidelity says.
Debt Collections and New Legislation
In January, the Department of Education resumed the reporting of delinquent student loans to credit bureaus, resulting in reduced credit scores for millions of borrowers. A record number of borrowers could default this year, loan servicers warn. Of the 38 million who should be making payments on their student loan debt, only about a third are, according to government data reported by the New York Times. Outstanding federal student loan debt in the U.S. is nearly $1.7 trillion.
On May 5, the Department of Education resumed debt collection for federal student loan borrowers who are in default. Penalties include garnishment of wages and pensions and withholding of federal tax refunds, Social Security payments and other federal benefits.
Mark Kantrowitz, an expert on student loans and financial aid, says the restart of enforced collections could affect approximately 5 million defaulting student loan borrowers. However, that’s down from 7 million before the pandemic, because many took advantage of the federal Fresh Start initiative to restore their defaulted federal student loans to current status, says Kantrowitz.
Additionally, House Republicans on April 29 introduced legislation that would transform the federal student loan system, eliminating some types of loans while requiring many borrowers to make higher monthly payments. Kantrowitz notes that among the bill’s provisions are elimination of the subsidized Stafford loan for undergraduate students and the Grad PLUS loan, and establishment of a $50,000 annual limit on the Parent PLUS loan. (The unsubsidized Stafford loan will remain in effect.)
“Families should borrow federal first, as federal student loans are cheaper, more available and have better repayment and forgiveness/discharge terms than private student loans,” Kantrowitz advises. But he says the House legislation could have the opposite effect. “This may shift some borrowing from federal loans to private student loans.”
James Brewer, a financial advisor with Envision Wealth Planning in Chicago, expresses a similar view. If adopted, the legislation will “radically change how people look at college,” he says, because it seems intended to move more loans to the private sector, which doesn’t offer some of the protections that the federal programs allow. Some people previously “saw a path to affordability, and they’re going to have to rethink their path to affordability,” he says.
Employers to the Rescue?
Employers are recognizing that they can play a bigger role at helping employees along this path.
Kantrowitz said the Schwab-Candidly partnership is similar to other employer services that offer student loan assistance, including student loan matching. Under the matching programs, which began in 2024, employers treat an employee student-loan payment like a 401(k) contribution and make a matching payment to the retirement account.
According to a February analysis by the American Society of Pension Professionals & Actuaries, student-loan matching provides “a powerful incentive for workers to save for retirement while paying down their debt” and it helps employers attract and retain top talent.
Most employers do yet not offer the benefit, although some big companies, including Kraft, Workday, News Corp. and Comcast are early adopters, CNBC reported in December.
Companies served by Candidly include financial services technology provider Fiserv, clothing retailer AEO (American Eagle Outfitters), advertising agency Crossmedia, software provider Salesforce, and insurance and asset management company Lincoln Financial.
Candidly reported “a significant uptick” in adoption of its student loan matching solution. It had three times more adoptions in the first quarter of 2025 than in all of 2024, and a 121% compound annual growth rate in median employee adoption across large employers, a company spokesperson tells Rethinking65.
But there’s more to Candidly than helping companies implement the student loan match. It offers employers Candidly Core, a suite of tools and resources designed to help employees optimize their student loan repayment strategy. Candidly Core also provides college planning resources, including a 529 college savings plan finder and calculators to help with decision-making.
Recruitment and Retention
Aside from the altruistic rush of helping employees, companies that offer student-loan services are also thinking about their own bottom line. Citing statistics from the International Foundation of Employee Benefit Plans, the Candidly spokesperson says employers cite the following top reasons for implementing student loan repayment programs:
Attract future talent, 92%
Retain current employees, 80%
Increase employee satisfaction and loyalty, 58%
Remain competitive in their industry, 55%
According to Candidly’s spokesperson, the company’s data shows that employers offering the Candidly Core platform see, on average, a 33% reduction in turnover among participating employees, and those offering its Student Loan Retirement Match see an average 58% reduction in turnover among participating employees.
Laurel Taylor, Candidly’s CEO, says her company’s services are increasingly relevant as the federal government cracks down on delinquent borrowers.
“With major shifts in federal student loan program availability and employees facing severe consequences for delinquency and default, such as wage garnishment and disastrous credit score implications, employees urgently need clarity and guidance,” Taylor says.
Candidly reported that employees who used its Core platform to qualify for an income-driven repayment plan realized an average reduction on their student loan bills of $347 per month. Another Candidly Core function that saw a surge in usage last year helps people employed in public service jobs apply for student-loan forgiveness under a program specifically for these workers, including including teachers, hospital workers and those who work for nonprofits.
Advisor Emphasize Caution
Brewer says that some of his clients are saddled with so much college debt that an employer contribution to their student loan payments would be more helpful and appreciated than a contribution to their 401(k).
Although the Department of Education is moving aggressively against delinquent and defaulted student loan holders, Brewer said he continues to give clients the same advice he always has: Families need to go into the student loan process carefully, not impulsively, as some of his clients have. Their thought process was “You’re going to go to college and we’re going to figure it out later,” he says, but “with every loan, the loan has to be paid, and for some people, it’s dawned on them.”
Beth Walker, a senior wealth strategist with Carson Wealth in Colorado Springs, Color., says the problems go beyond the student loan system. The root cause is excessive college tuition, she said. “The student loan system is a wealth transfer program — transferring dollars from consumers to institutions that have no skin in the game,” she says. “It’s a poorly structured system with no accountability.”
Ed Prince is a writer for Rethinking65. In a four-decade career in journalism, he has served as an editor with many of New Jersey’s leading newspapers, including the Star-Ledger, Asbury Park Press and Home News Tribune. Read more of his articles here.
