Newsbreak: Student Loan Borrowers Rejoice as The Secure 2.0 Act Brings Relief and Retirement Savings Opportunities

The Secure 2.0 Act of 2022, which was enacted after being signed into law by President Biden, endeavors to support student loan borrowers in their efforts to both pay off their debt and save for retirement by enabling employers to consider eligible student loan payments as additions to a retirement savings plan. This new law starts in January 2024 and addresses the growing student debt crisis in the US, as reported by Trea Branch of Nerd Wallet on January 31, 2023.

Student loan debt has a significant impact on retirement savings, with 79% of respondents in a 2018 Fidelity report stating that student loans affected their retirement savings. Nearly half of millennial and Generation X borrowers have had to tap into their retirement savings to cover expenses.

Under the new law, employees making qualified student loan payments can receive the same benefits from their employer’s 401(k) contributions, according to a report by JD Supra on January 23, 2023. For example, an employee making a monthly student loan payment of $371 could also receive a monthly 401(k) contribution of $196 from their employer.

The new law Is not a cure-all and raises questions about which employers will provide this benefit and if both private and public sector industries will participate. Additionally, struggling borrowers, including those in default or forbearance with their student loans, may not be able to take advantage of the employer retirement savings match. The Secure 2.0 Act also includes provisions such as 401(k) auto-enrollment and penalty-free early withdrawals from tax-preferred accounts.