PLANSPONSOR - October-November 2022 - 12

UPFRONT
Student Loan Forgiveness and Retirement
ALIGHT SOLUTIONS is urging plan
sponsors to champion the idea that
participants
should allocate
any
additional
income released from student loan
forgiveness to their retirement account.
The firm's " 2021 Employee Wellbeing
Mindset Study " found that 70% of workers
under age 40 with student loan debt said
student loans have significantly or somewhat
affected their ability to save for the
future. The report also showed that 23%
of respondents said their level of debt is
ruining their quality of life.
Illustrating the growth of a dollar
deferred and invested to
retirement
is
one way to tackle this, the study says.
Considering President Joe Biden's recent
executive order regarding student debt,
Alight took a fresh look at how income can
affect retirement savings.
In August of this year, Biden
announced that the Department of
Education will provide up to $20,000 in
debt cancellation to Pell Grant recipients
who have college tuition loans held by
the Department of Education, and up to
$10,000 in debt cancellation to non-Pellgrant
recipients.
" The additional income that participants
may be able to gain from the
student loan forgiveness plan could help
[increase people's retirement nest egg], "
according to Alight. " For example, if an
TIDBITS
A Little Savings With Your Coffee?
Starbucks spiced up its benefits by adding
a student loan management program and,
with help from Fidelity Investments, an
emergency savings program, My Starbucks
Savings. The company says the new programs
are in answer to employees' requests.
12 PLANSPONSOR.COM October - November 2022
employee at age 25 started saving $100
a month, by the age of 65 they would
have almost an additional $300,000
in savings. Specifically, that would
be $48,000 more actually saved but,
more importantly, nearly an additional
$250,000 in just interest income. "
The federal student loan forgiveness
program presents a window for plan sponsors
to urge workers with student debt to
Another strategy whereby plan sponsors
can assist participants is to offer
paycheck savings planners and financial
well-being tools: " Provide digital tools
spanning multiple benefits/savings vehicles
that help employees deal with their
entire paycheck and their entire benefit
lineup, " says Maguire.
Employers are looking to help
workers combat financial stress, and
" Provide digital tools spanning
multiple benefits/savings vehicles
that help employees deal with
their entire paycheck and their
entire benefit lineup. "
boost their retirement plan contributions,
says Virginia Maguire, vice president of
wealth solutions and strategy at Alight.
Alight suggests that plan sponsors
use strategies such as personalized
engagement and messaging to urge plan
participants to act to increase their contributions.
Using examples such as the one
given above that illustrate the time value of
money, an employer may tie loan forgiveness
in with messages it sends about the
401(k) plan and health savings accounts.
options to increase well-being at the
workplace are desired by workers and
plan sponsors, she adds.
" With employers' continued desire
to drive optimal well-being support and
utilization, they may be best positioned
to provide employees who qualify for
the student loan debt forgiveness plan
with personalized guidance from their
plan providers for how to best allocate
these additional dollars toward long-term
savings, " she says. -Noah Zuss
http://www.PLANSPONSOR.COM
PLANSPONSOR - October-November 2022

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