May 18, 2022


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Why 2022 is the year student loans could be linked to your 401(k)

Retirement reform advocates in Washington have had a bumpy 2021. Multiple efforts to help people save more effectively for retirement, including one informally called SECURE 2.0, seemed to be on track for passage before Congress’ other efforts crowded them out.

But the effort may gain renewed traction in 2022. In a recent webinar co-hosted by Yahoo Finance and the Bipartisan Policy Center, Rep. Fred Keller (R-PA) said, “I think our chance for success in the upcoming year to get the SECURE 2.0 on the books is pretty positive.”

Keller and other lawmakers have focused on one particular provision: linking retirement savings to student loan debt. The idea is to allow businesses to contribute to employees’ retirement accounts when workers make their student loan payments. In other words, if you put $100 towards your student loan, your company could “match” it with up to $100 going into a retirement plan like a 401(k).

The proposed law would help young people avoid missing out on years of valuable 401(k) matches. Currently, many people put off retirement saving in their early years even as experts often note that those exact years of saving are the most valuable, given the power of compound interest.

Data from Bankrate suggests that college graduates with student loans often have to delay other priorities. Thirty-four percent report having delayed emergency savings, 23% say they have delayed buying a home, and 29% have delayed retirement savings.

WASHINGTON, DC - NOVEMBER 18: Rep. Fred Keller (R-PA) looks back to fellow House Republicans including Rep. Mike Johnson (R-LA) (L) before the start of a press conference on vaccine mandate for businesses on November 18, 2021 in Washington, DC. Keller is introducing legislation to formally disapprove of and nullify President Biden’s vaccine mandate for federal employers. (Photo by Anna Moneymaker/Getty Images)

Rep. Fred Keller (R-PA) – seen above at an event protesting vaccine mandates for businesses – is a conversative Republican who wants to ally with Democrats on retirement reform legislation in 2022. (Anna Moneymaker/Getty Images)

The idea to allow simultaneous loan payments and retirement savings has bounced around Washington for years, gaining support from Republicans as well as Democrats like Sen. Ron Wyden of Oregon. For his part, Keller thinks 2022 could be the moment for this idea. 

“There’s a lot of support from employers because they understand the importance of making sure that their workforce is secure,” Keller says.

Those not fully on board with the idea note that one-third of private sector workers don’t have access to a retirement plan at work. Therefore, they argue, a new student loan and 401(k) feature wouldn’t necessarily help many Americans, especially those on the lower end of the income spectrum. 

“Why aren’t we fixing the tax code so that employers can actually just pay people’s student loans directly rather than just try and do this round-about system?” Jennifer Brown, a researcher at UnidosUS, told Yahoo Finance in 2019.

But Keller calls this “a positive step” to help recent students. 

“This, to me, is a thing that I think everybody can get behind because it’s incentivizing people to save and the important part about this is it’s not something where the government has to come up with money to put into this like you would have to in forgiveness and so forth,” he said. 

‘Significant reform to retire retirement savings’

Keller, who opposes student loan forgiveness, says the proposed SECURE 2.0 reforms are “a sustainable model” for how to help students that has a good chance of passage.

“I look forward to doing everything we can to get this across the finish line in 2022,” he said.

Other provisions in the legislation, called the Securing a Strong Retirement Act of 2021, concern raising the required minimum distribution age when people must start taking money out of their private retirement plans as well as measures to push employers to automatically enroll new employees in retirement plans.

In late 2019, Congress passed “SECURE 1.0,” the first major retirement legislation in years; it included 401(k) provisions to help part-time workers save and improved access to annuities among other changes.

In an interview with Yahoo Finance, House Ways and Means Ranking member Kevin Brady (R-TX) listed further retirement reforms as one of his top priorities for 2022. Noting that SECURE 2.0 has bipartisan support and would be “another significant reform to retirement savings,” he expressed hope that it could get done in the coming 12 months.

For now, student debtors have a reprieve from paying off their federal student loans. The U.S. government paused federal student loan repayments through Jan. 31 in response to the pandemic, and President Joe Biden recently announced an extension through May 1.

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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