How SECURE Act 2.0 is Helping People Pay Student Loans and Save for Retirement
Following the 2008 financial crisis, student loan debt became a major economic issue in America. In fact, according to Education Data Initiative, Americans owe more than $1.7 trillion in student loans. While there are a few ways you can pay down your student loans, one option that many people don’t know about is utilizing SECURE Act 2.0.
Student loan debt is a challenge for many Americans
Student loan debt is a major challenge for many Americans. According to World Economic Forum, student loans are the second largest source of U.S. household debt, behind only mortgages. While other forms of debt have declined over time as people pay down their balances and reduce their overall borrowing, student loan balances continue to grow at an alarming rate—a fact that causes many Americans to feel they must choose between saving for retirement or paying off their loan(s).
However, thanks to changes made by SECURE Act 2.0, some borrowers now have the benefit of doing both.
The Best of Both Worlds: Matching for Retirement and Loan Payments
Starting in 2024, employers will have the option to make matching contributions to employer-sponsored retirement plans such as 401(k)s and 403(b)s based on the employee’s qualified payments toward their student loans. This means even if employees don’t contribute to their retirement plan, employers can still contribute to their employees’ future financial security if the employee has been taking action to pay student loans—an enticing benefit for many in the labor sector, giving them more financial flexibility to be able to contribute to their retirement as well.
Qualifications for Student Loan Matching, If offered by the Employer
To be eligible for the student loan match, FIRST the Employer must decide to offer this feature in their retirement plans, if offered, then employees would be required to...
Make payments towards an IRS approved qualified student loan.
Have been enrolled in a program that leads to a certificate or degree for at least 50% of its credit hours.
Give loan repayment documentation to the employer depending on the employer's established procedures.
Student Debt Doesn’t Have to Disrupt Retirement
SECURE Act 2.0 has given Americans the opportunity to pay student loans while also having more financial flexibility to have funds contributed towards their retirement. However, this isn’t the only option available to Americans. At RPCSI, we have a wealth of informative articles on retirement preparedness and retirement industry information, including 6 tips for saving for retirement with student loan debt.