Republicans and Democrats are working together on legislation that will encourage employers to help pay off their employee’s student loans debt through federal tax breaks.
Republicans and Democrats are working together on legislation that will encourage employers to help pay off their employee’s student loan debt through federal tax breaks.
The bill aims to amend the Internal Revenue Code to give tax breaks up to $5,250 yearly to employees for their student loans, which means the subsidy would not be counted as income. The hook for employers is that they can deduct the employee subsidy. Just like a 401(k) the contributions to the worker’s retirement fund would not be taxable.
“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,” Peters said Thursday in a statement. “I would not have been able to attend college without student loans and work study programs, but the rising burden of student loan debt has weighed down graduates and is a drag on our entire economy.”
Last month, U.S. Rep. Rodney Davis, an Illinois Republican, introduced the bill along with Rep. Scott Peters, a Democrat from California. They currently have 29 colleagues supporting the legislation. The same bill was proposed in 2015 by Davis and Peters but it didn’t pass. Fortunately, this time around there is more support than in 2015.
“[The bill] delivers public subsidies in an arbitrary and potentially unfair manner and would encourage employers to do the same,” Matthew Chingos, a senior fellow at the Urban Institute, told The Washington Post. “The largest benefits go to individuals with the most student debt, who are least likely to default on their loans. A worker with $10,000 in debt could only use the benefit for two years, whereas a worker with $100,000 in debt could use it for 20 years.”
Only four percent of companies currently student loan repayment assistance. The trend has been getting more and more popular. This bill, if it passes, could drive the number of businesses who offer loan assistance way out across the country.
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