Congress May Soon Offer Retirement Aid for Graduate Students

House of Representatives passes SECURE 2.0, also known as the Securing a Strong Retirement Act. Several changes have been made regarding tax-advantaged retirement accounts with this bill, but graduates with large federal loans will definitely benefit from this new bill.

Secure 2.0: What Is It?

The SECURE Act 2.0 expands on the changes made by the original Secure Act, which was signed in 2019. Both laws simplify paperwork and lower startup costs for employer-sponsored retirement plans. It makes it easier for workers and employers to save for retirement through the SECURE Act and SECURE Act 2.0. SECURE 2.0 will impact most retirement accounts, but not everyone will benefit. 

Savings For Graduates Get a Boost.

The SECURE 2.0 Act also provides some assistance to workers with student loans. Among all the changes made by the law, this is the most significant.

For millennials and Generation Z, student debt has created a slow-growing crisis in their retirement accounts. Students often enter the workforce with high-interest loans and prioritize paying them over other financial considerations. Consequently, they often don’t have a retirement account instead of paying down debt.

To help with this, the SECURE 2.0 Act makes two changes. Auto-enrollment would be required for employers who offer 401(k) or 403(b) retirement plans. This law would reverse the current model, allowing employees to leave the program. The employer would include everyone by default in a retirement plan unless an individual opts out.

Employers can automatically enroll their employees in office retirement plans, but this is not required. Younger workers are more likely to participate when this is implemented.

Secondly, and perhaps most importantly, SECURE 2.0 accounts for student loan repayments in the retirement system. Employers who make matching contributions to retirement accounts can now do so based on employee contributions and student loan payments. Employees who pay $100 to a qualified, federally recognized student loan in a given month might receive $100 from their employer in their 401(k). As a result, graduates who prioritize debt payments will be able to join employer-sponsored retirement plans, a significant change from the current system.

In its report, the House Ways and Means Committee writes that this section will help employees affected by student debt who may be unable to save for retirement due to their debt load. As a result of repaying their loans, Section 109 would allow such employees to receive matching contributions. Most millennials and generation Z graduates with student loans have delayed saving for retirement to pay off their loans. Matching contributions would be voluntary for employers but could significantly affect young workers’ retirement planning.

The Senate is now expected to pass a version of SECURE 2.0 that is broadly comparable to the one passed in the house.

SECURE 2.0 is the name of the retirement bill passed by the House of Representatives. Under the new law, retirement would be restructured in numerous ways, especially for graduates with large debt loads.