To address student loan debt relief, U.S. Representatives Rodney Davis (R-Ill.) and Scott Peters (D-Calif.) recently announced H.R. 795, the Employer Participation in Student Loan Assistance Act. To date, the bill has been co-sponsored by 42 representatives from 25 states, with strong support from both Republicans and Democrats.
An overview of the bill’s benefits from Rep. Davis’s website follows:
Benefits to employees include:
- They will receive a tax-exempt benefit of up to $5,250 per year to pay on their already incurred student loan debt.
Benefits to employers include:
- Permits employers to assist employees who already have student loans to the same degree they can help employees with continued education per 26 U.S. Code § 127.
- Helps companies recruit and retain young, educated talent.
- Employers can deduct the subsidy provided to employees.
Benefiting Employers, Employees, and Economy
While providing student loan debt relief is not new–employers began pioneering the benefit over the past few years–this bill would provide a tax incentive for more employers (to offer it) and employees (to take advantage of it…if they needed one). Additionally, Representative Davis believes that the proposed legislation would have a positive impact beyond just the employer and employee.
“Seven in ten college seniors last year graduated with student loan debt – which now represents the second highest form of consumer debt,” said Davis. “This debt is a drag on our economy because it prevents many young adults from contributing to our economy. Many are putting off buying a house, purchasing a car, or saving for retirement. Some companies are already offering this benefit because they see the advantage it gives them when recruiting and retaining younger employees, but we want to encourage more to participate so we can help both struggling graduates and our economy.”
Representative Peters echoed his colleague’s remarks while underlining the Act’s potential to increase the competitiveness of the U.S. workforce in a global economy. He believes that the same benefits of employer provided tuition-assistance can be realized through this legislation.
“Access to affordable higher education has made the American dream attainable for millions of Americans, and is central to our nation’s competitiveness and success,” said Peters. “Just as allowing employers to offer tax-free tuition assistance has enabled more Americans to advance their education, offering this same incentive for student loan payments will speed up the repayment process so that graduates can begin to make investments such as buying a home, starting a family, or saving for retirement,” said Peters.
Support Behind Student Loan Debt Relief
A bill of this nature will of course attract a number of supporters that stand to benefit from its passing. A number of financial tech companies–FinTechs as the cool kids call them–have lined up to support the bill. All of them have platforms designed for managing student debt relief programs. After taking a look at some of them, I can tell you two things: 1) they have some very robust, reasonably priced solutions, and 2)…they have some very creative names. One is called Peanut Butter. No joke.
However, beyond the FinTech companies, the Human Resources world has sounded off in support as well.
Kathleen Coulombe, Senior Advisor at Society for Human Resource Management (SHRM) sees the proposed legislation as a win-win for employers and employees. “It allows employers to attract and retain top talent, while providing employees with valuable assistance to offset the cost of their education,” Coulombe said.
It’s also evident that there is support among employers. According to the SHRM 2016 Employee Benefits Survey, only around 4 percent of companies offer student loan repayments programs– but that’s up from 3 percent the previous year, the first year the question was asked. Bruce Elliot, SHRM Manager of Compensation and Benefits, believes this number will continue to rise. “Those numbers are understated because there is a lot of pent-up demand for this stuff,” said Elliott. “I do think it’s the beginning of a trend.”
I, for one, hope he’s right!