Impact of Student Loan Matching Provision

Now that student loan repayment obligations have officially resumed, additional interest in the SECURE Act 2.0’s student loan matching program is expected. Under the new law, beginning in 2024 and beyond, employers will be entitled to make matching contributions to an employer-sponsored retirement plan based on an employee’s qualified student loan payments. The option will be available even if the employee does not directly contribute to the retirement plan. Only payments that are classified as qualified student loan payments can be considered in the employer’s matching program. In recent months, many have questioned whether the program will be effective in helping lower-and middle-income taxpayers save for retirement.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the impact of the SECURE Act 2.0’s student loan matching benefit.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Bloink

Byrnes

Their Reasons:

Bloink: This new law provides clarity and a powerful way for employers to attract and retain top talent. It also recognizes that millions of Americans are struggling with the burden of student loans, and that student loan repayments are preventing many of those Americans from saving for retirement. This offers employers a way to provide a valuable employment benefit and encourages companies to help their employees save for retirement now that student loan repayment obligations have officially restarted.

Byrnes: Yes, the student loan matching option does provide a valuable new employment benefit option for companies to use to retain employees. However, it primarily benefits those corporations who employ large numbers of college-educated employees. It provides no benefit to the companies that employ blue collar workers who arguably need help saving for retirement the most.

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Bloink: We have to remember that student debt has the potential to have far-reaching economic consequences for all Americans. Millions of people are struggling under the weight of sky-high student loan payments. This makes it impossible for many Americans to save for retirement at all. It’s a nationwide problem that we must address with solutions like this SECURE 2.0 provision.

Byrnes: Many companies who employ both college and non-college educated workers may be dissuaded from offering this benefit to any workers at all. The student loan matching benefit is entirely optional and will certainly add another layer of complexity to the already-complex retirement planning landscape.

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Bloink: Yes, we should be focused on helping all Americans save for retirement. However, it’s also important to remember that one of the most often-cited deterrents to saving for retirement is student loan debt. We can’t expect to address every single issue that prevents robust retirement savings in a single law. It’s a widespread issue. This student loan matching provision is aimed at addressing the unique problem faced by employees who are unable to contribute to employer-sponsored retirement plans because of student loan debt.

Byrnes: College educated workers are among the most likely to be able to save for their own retirement. Most students choose to take on student debt in order to increase their future earning potential—and there are no income restrictions tied to this benefit. I understand directing benefits toward college students who were defrauded in some way by their colleges or universities, but we should be focusing less on student loan-related tax benefits and more on encouraging employers to help those Americans who didn’t have the luxury of attaining higher education save for their retirement.