As some 45 million borrowers prepare to begin repaying their federal student loan debt in September, SoFi at Work is launching a new service aimed at combatting the effects of debt payments on retirement readiness.
The personal finance company is launching its Student Loan Verification (SLV) service, a new platform that links student loan debt payments to elective 401(k) or 403(b) retirement contributions. With the service, employers can make matching contributions to workers’ retirement plans, as long as its employees are paying down their student debt.
“At SoFi, we’re dedicated to helping people get their money right, and SECURE 2.0 and the provision that makes it easier for companies to support all employees’ financial well-being is a great example of that,” said Barrett Scruggs, vice president and business lead at SoFi at Work, in a statement. “Our Student Loan Verification service makes it easy for companies to put this emerging, yet highly impactful benefit into action for a more inclusive future.”
The service reflects student loan-friendly provisions outlined in SECURE 2.0, which will allow employers to match employees’ student loan payments with contributions toward retirement plans as part of an existing benefits program starting in 2024. The new legislation will also allow for remaining balances in 529 accounts to be rolled into a Roth individual retirement account (IRA).
In its statement, the personal finance company says it is partnering with financial groups and recordkeepers to administer the SLV service. Plan design, data security, and reporting will be provided by SoFi at Work.
Supreme Court decision in limbo as payments set to resume
While President Biden’s debt ceiling deal terminates the pause on federal student loan payments, millions of borrowers continue to anxiously await the Supreme Court’s decision on his student debt cancellation plan, which would not affect terms of the recent deal.
The Biden Administration’s student debt relief plan would provide up to $20,000 of federal loan forgiveness to each borrower. The plan, first announced in August 2022, has been met with immense opposition by a handful of Republican leaders, who cited skepticism over the plan’s cost, which could range anywhere from $300 to $430 billion, analysts have estimated.
A St. Louis federal appeals court later filed an injunction against the plan in November of last year, prompting the Biden Administration to file an emergency application to the high court, where it remains today. A decision is set to be announced by the end of June.
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