This new proposal in Congress could help you pay off student loans and save for retirement.
Here’s what you need to know—and what it means for your student loans.
If you’re paying off student loans, you know how challenging it is also to save for retirement. Sen. Ron Wyden (D-OR) wants to change that. Wyden introduced The Retirement Parity for Student Loans Act, which would allow employers to make matching contributions into a worker’s retirement plan as if their student loan payments were salary reduction contributions made to a retirement plan. The legislation would help student loan borrowers who can’t make student loan payments and save for retirement at the same time.
Student loans and retirement: here’s how it works
Here’s how the proposal would work for a student loan borrower:
- You make regular student loan payments;
- Your employer makes a matching contribution into your retirement plan;
- The rate of matching for student loans and for salary reduction contributions must be the same;
- Those matching student loan payments are considered salary reduction contributions made to the retirement plan;
- 401(k), 403(b), SIMPLE and governmental 457(b) retirement plans are all eligible; and
- This retirement benefit is voluntary, and employers decide whether to participate.
What this means for student loan cancellation
What does this mean for student loan cancellation? Wyden supports wide-scale student loan cancellation and was one of 16 U.S. senators who signed on to a resolution that calls on President Joe Biden to enact student loan cancellation by executive order. Wyden, a progressive member of Congress, also believes that Biden should cancel up to $50,000 of student loans per borrower. At the same time, Wyden appears to recognize that one-time student loan cancellation alone won’t solve student loan debt for student loan borrowers. As such, he proposed an alternative way to pay off student loans that could enhance wide-scale student loan cancellation if enacted, or replace it if it’s not implemented. This proposal reflects a growing trend in Congress to partner with the private sector to address issues of student loans, student loan repayment and retirement. As Congress seeks solutions to address student loan debt, Congress increasingly has looked to shift the burden to the private sector to help with student loan repayment.
While this is only a proposal, it’s possible that other members of Congress will propose alternative ways to pay off student loans. There’s no guarantee that Congress or the president will enact student loan cancellation. Even if there is wide-scale student loan forgiveness, it may not cover all your student loans. Therefore, it’s critical to evaluate all your options for student loan repayment. Here are some potential places to start, all of which have no fees: