Cantwell Bill Allows Recent Graduates to Save for Retirement While Paying Down Student Loan Debt
Bill creates new option for employers to match student loan payments with retirement contributions
WASHINGTON, D.C. – Today, U.S. Senator Maria Cantwell (D-WA) joined U.S. Senator Ron Wyden (D-OR) and four of their colleagues in introducing legislation to give working Americans the ability to save for the future while repaying their student loans. The Retirement Parity for Student Loans Act would allow employers to match employees’ student loan payments with a contribution to their retirement plan, allowing many Americans to start saving for retirement earlier in their careers.
“Every American deserves the right to a secure retirement, and we need to do everything possible to safeguard the financial security of Americans strapped with student loan debt,” said Senator Cantwell. “How can college graduates save for cars, houses, and especially retirement if they’re paying off student loan debt well into their working days? We must do more to help these workers save.”
Under current law, employers may only make “matching” contributions to a 401(k) retirement plan if employees are also making contributions. Under this proposal, recent graduates who cannot afford to save money for retirement due to student loan repayments would still benefit from the employer match. For example, if an employee pays $500 a month in student loans, and his or her employer matches 50 percent of retirement plan contributions, Cantwell and Wyden’s bill would enable the employer to contribute $250 to the employee’s retirement account every month.
Many Americans with student loan debt start saving for retirement later in life than those without debt. According to the Employee Benefit Research Institute, households headed by a person age 35 or younger with a college degree and no student loan debt report median defined contribution account balances of $20,000—compared to $13,000 for similar families that have student loan debt.
At the end of 2016, Washington state graduates collectively owed $24.4 billion in student loan debt. In Washington, the average balance of student debt is nearly $24,000, and over half of all Washington college students graduated with some debt in 2017. Surveys have found that 62% of student loan borrowers have had to put off saving for retirement or other investments.
In addition to Cantwell and Wyden, the bill is cosponsored by U.S. Senators Ben Cardin (D-MD), Sheldon Whitehouse (D-RI), Maggie Hassan (D-NH), and Sherrod Brown (D-OH).
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