Debilitating student debt forces many borrowers to postpone retirement to pay their expenses on time each month. However, a new law might be able to help.
It’s the newly passed “Secure 2.0” bill, which changes a retirement plan first put in place by the Secure Act of 2019. The bill, among other improvements, gives employees greater retirement savings choices while also encouraging them to re-enter the workforce in consideration of the ongoing structural labor shortage.
Allowing employers to make contributions to a worker’s retirement savings is one of the ways it does this. According to Tamara Telesko, Director of Wealth Planning at the Teachers Insurance and Annuity Association of America (TIAA), many companies now match employees’ 401(k) contributions, however, this change would allow employers to equal the amount that employees put toward their student loan payments.
Employers will be able to contribute a matching amount to student debt repayments starting in 2024, according to Telesko. “Including this in your plan may be beneficial if you’re trying to attract young adults, for example, who have a lot of student loan debt.”
Legislators have long considered the possibility of connecting student loan payments to retirement. The Enhancing American Retirement Now (EARN) Act, which would support borrowers of student loans in setting down money for retirement, was presented in September by Senators Ron Wyden of Oregon and Mike Crapo of Idaho.
The payments that borrowers pay on their student debt burdens would be counted as the contribution amount companies would match. Specifically, it would let employers pay in donations to borrowers’ 401(k)s.
