Maybe I'm not sophisticated enough to understand the advantages, but this doesn't seem like a great proposition.
I can only agree that it's good to incentivize people to save in their 401ks with the rationale that it creates a habit... but I feel like that's also a problem in itself because then people wouldn't have retirement savings, which is already a problem. After all, it's a question a lot of people struggle with: Should they focus their efforts to pay off their student loans or save for retirement? A lot of people saddled with student loan debt delay retirement especially if their student loan debt amount and interest rates are so high that it makes more financial sense to pay down the principal as soon as possible, which may mean forgoing retirement savings entirely. I'm not sure how this would help that problem. It also seems like a very circular, out of the way method to pay off student loans... like putting in a middleman where the situation doesn't call for that.
If they use their 401k funds to pay for their student loans, what happens to the loans while they're funneling it into the 401k? Are they waiting to for a certain principal to deduct and then pay off the student loan in one go, or is it just a complicated transaction every time the employee gets a paycheck, where the funds are deducted from the paycheck, go into the 401k, and then immediately go into the student loans? I don't understand. Maybe I'm thinking too literally about how it works. But it just begs the question, why are 401ks even involved in the first place?
Plus, will the tax-free benefit even be advantageous if the student loan figure is really high, and when the interest rate is also really high? Maybe they'd just be breaking even, and it's not a benefit. I have an unpopular opinion that paying for memberships just to save money doesn't really often result in people getting that much of a net savings, (like having a membership at Costco). It seems similar. Except you're not paying any fee upfront other than student loan interest that accumulates and may become capitalized.
Then, it only benefits people who are able to get jobs. A small part of the student loan problem is the saturated market of skilled individuals seeking a finite quantity of available jobs. If these people take on jobs to make ends meet that don't offer the benefit of a 401k, or they have a hard time finding any variety of gainful employment, they do not benefit. So this isn't any better of a solution than to make student loan payments "tax-free" in itself without going through all this circular fuss. Better for some, not for all.
Ideas are dime in a dozen so why not focus on the ones that actually cast a wider net in terms of benefitting the population? I'm not sure why this was even noteworthy to Forbes. But again, maybe I'm just missing something and I just don't really understand the inner workings of why this is such a great idea, so I could probably be totally wrong about all this.