February 12, 2019

Senators Warren, Lee, Wyden, and Scott Re-Introduce the Graduate Student Savings Act

Bipartisan Bill Would Help Graduate Students Build Retirement Savings

Bill Text (PDF) | One-Pager (PDF)

Washington, DC - United States Senators Elizabeth Warren (D-Mass.), Mike Lee (R-Utah), Ron Wyden (D-Ore.), and Tim Scott (R-S.C.) today re-introduced the Graduate Student Savings Act of 2019, a bill to help graduate students start saving for their retirement by allowing funds from a graduate student's stipend or fellowship to be deposited into an Individual Retirement Account (IRA). Federal and state governments generally tax fellowship or stipend funding as income, which does not qualify as "compensation" and therefore cannot be saved in an IRA.

While a majority of doctoral students report receiving some of their financial support during graduate school from fellowships or grants, about a third of all students report that fellowships or grants were their primary source of funding. The median doctoral student also takes about seven years to finish a degree, potentially preventing students from saving portions of their income in a tax-advantaged account for a significant period of time. This bill would remove this unnecessary hurdle so that students and postdoctoral fellows can start saving a portion of their stipend in an IRA today.

"Graduate students deserve a chance to start saving for retirement," Senator Warren said. "This bill will make it easier for students to graduate with a degree and a head start towards a financially-secure retirement."

"Grad students are investing in their futures through education, and they should be able to invest in their futures by saving for retirement, too," Senator Wyden said. "When grad students want to make smart choices about their savings, outdated tax rules shouldn't stand in the way. This is commonsense legislation with support on both sides, so I'm hopeful we'll be able to get it across the finish line soon."

"As a former insurance small business owner, I know all too well the importance of saving for retirement and a rainy day," said Senator Scott. "The Graduate Student Savings Act is vital legislation that opens up opportunities for students to ensure that they are on the path to success."

"Students striving for a brighter future and a secure retirement should not be penalized for pursuing advanced degrees," said Congressman Kennedy. "By passing the Graduate Student Savings Act, we can continue to dismantle barriers throughout our education system that deny opportunity for Americans of all ages."

The Graduate Student Savings Act of 2019 is supported by the International Union, United Automobile, Aerospace, & Agricultural Implement Workers of America; Service Employees International Union; National Association of Graduate-Professional Students; Teachers Insurance and Annuity Association; Betterment; American Federation of Teachers; and Fidelity Investments.

"The financial situation of graduate students is such that many can't imagine being able to retire," said Kaylynne Glover, Director of Legislative Affairs at the National Association of Graduate-Professional Students. "On top of their student loans, depressed earnings, and additional years required to earn a degree, the fellowship money we live on can't be saved for retirement. It really does feel like a dream reserved only for others. This bill would provide hope for us that the dream of retirement could one day be reality."

"Saving early helps to establish a lasting retirement savings habit, leading to greater lifelong financial security," said Roger W. Ferguson, Jr., President and CEO of the Teachers Insurance and Annuity Association, a global, diversified financial services firm and leading provider for those in the academic, research, medical and cultural fields. "We applaud today's introduction of the Graduate Student Savings Act, and urge lawmakers to support graduate students as they seek to invest in their futures."

"Many graduate students receive stipend or fellowship support that helps them pay for food, rent, transportation, or other living expenses while in school. Although this compensation is taxed as regular income, they do not have the option to save it in an IRA," said Ken Hevert, Senior Vice President of Retirement at Fidelity Investments. "All Americans should have access to tools that can help them save for retirement. People are living longer yet often have fewer sources of lifetime income, so the earlier they can place some money in an IRA, the bigger the impact down the road."

"The Graduate Student Savings Act of 2019 would be a welcome change, making it easier to save as early as possible," said Jon Stein, Founder and CEO of Betterment, the largest independent online financial advisor. "Saving enough for retirement is already challenging and the current restrictions for graduate students make it even more problematic. We're proud to support it and view it as another positive step toward improving retirement outcomes."

Senators Warren and Lee originally introduced this legislation in June 2016, along with a companion bill introduced in the House by Congressmen Joe Kennedy (D-Mass.) and Luke Messer (R-Ind.). The Senate Committee on Finance unanimously passed the bill in September 2016. Senators Warren, Lee, Wyden, and Scott also introduced the bill in 2017.