UPDATE: The Senate introduced a new version of the bill entitled the Employer Participation in Repayment Act. The bipartisan bill, sponsored by by Senators Mark Warner (D-VA) and John Thune (R-SD), is likely to put the new regulation on the fast track.
This regulation would function under the IRS, similar to employee tuition assistance laws. Adding tax relief to student loan repayment could ease cost barriers for employers. While similar laws have failed in the past, experts have reason to believe that the current political climate — including a bipartisan concern over the cost of college — may allow it to pass this time around.
- In a bipartisan press conference on March 3, Reps. Rodney Davis (R-IL) and Scott Peters (D-CA) introduced a bill to address student debt. H.R. 795, or the Employer Participation in Student Loan Assistance Act, lets employers make a $5,250 tax-free contribution towards their employees’ student loans.
- In a Student Loan Hero survey, 46% of the respondents said they preferred a plan that helps pay down their student loan debt over a 401(k) plan if they could choose either benefit, while 53% favored a repayment assistance plan over paid time off.
- The proposal creates a plan similar to a tuition reimbursement benefit. Speaking at the press conference, Scott Thompson, CEO of Tuition IO, said, “The impact of [the bill] is immediate and highly tangible: Employees get the full benefit, pre-tax, exactly the way they should. Adding tax relief to the equation could elevate student loan assistance [to a] 401(k) contribution as one of the most valuable financial benefits a company can offer its workers that directly impacts their quality of life today.”
Americans, especially young people, are entering the workforce owing hundreds of thousands of dollars in college loans. Without the aid of loan repayment assistance, they could spend a large portion of their career earnings and much of their working lives paying down their debt.
Last year, Aetna joined the ranks of companies who have introduced a tuition repayment program for their employees.
As the survey results show, young people favor paying down their college loans first over other dollar benefits. If lawmakers have the votes to pass the proposal, they’ll be changing the lives of thousands of U.S. workers.
Employers who offer the benefit could have an edge in recruiting and hiring skilled talent.