There are few things on which the political parties agree these days. It was, therefore, a rare moment of bipartisanship last month when Republican Rodney Davis of Illinois and Democrat Scott Peters of California joined together in the U.S. Capitol to introduce the Employer Participation in Student Loan Assistance Act, which creates tax advantages for employer participation in student debt assistance.
There are a number of reasons why Congress should make employer contributions to student loan debt tax advantaged. Here are a few:
This is an urgent problem for young workers struggling with student debt
Representative Peters and Davis both noted that student loan debts are delaying and impairing the American dream for young workers. For example, 52 percent of borrowers report that student debt is ruining their quality of life, and employees with student loan debt contribute less to their retirement savings. Additionally, the Real Estate industry laments that young workers are putting off purchasing a home because of student loan debts. Delaying retirement savings and home purchases have a human toll, but they also drag down our economy and will lead to increased dependency on federal programs such as Social Security. Furthermore, taxpayers, who are on the hook for much of the student loan debt, will have reduced exposure from fast tracked repayments and reduced defaults that would arise from greater employer participation.
Employers can better attract and retain talent
Leading employers in tech, healthcare and professional services such as UpRight Law, Medix and Rise Interactive, are already offering student loan assistance programs. Congress can do a lot to normalize and grow these type of employee benefits by enacting legislation. Employers who offer student loan assistance find it easier to attract and retain their workers. This is particularly true for women and minority employees. Reduced employee turnover and employee’s reduced stress about their personal finances are critical factors for a business’ productivity, so this legislation has the potential to help many companies and also grow the economy.
Employer participation is good for taxpayers
With more than $1.2 trillion outstanding student debt, there is significant exposure to a student debt financial crisis for the U.S. taxpayer, particularly in light of an 11.2 percent delinquency rate and the exploding costs of federal loan forgiveness programs. Employer participation brings in new private sector money to help address the problem and alleviate taxpayer exposure. It also provides a structured framework for borrowers to help them make timely payments on their student loan debt. Furthermore, with additional disposable income associated with faster satisfaction of student loan debt obligations, young workers will be better able to contribute to growing the domestic economy and expanding the government’s tax base.
The solution has broad support from Republicans and Democrats
Many congresspeople have offered ideas about how to address our nation’s student debt problem, but these proposals tend to appeal to only one party or the other, and therefore fail to attract the bipartisan momentum necessary to advance through Congress. Employer participation in student debt is a concept generated from members on both sides of the aisle. The Employer Participation in Student Loan Assistance Act currently has 24 republican and 27 democratic sponsors, and the momentum is building as bipartisan members of the House Ways & Means committee recently introduced the HELP for Students & Parents Act late in March.
Employer assistance in student loan repayment is a win-win proposal for America, and it is exciting to see leaders emerge to champion this topic in the private sector and in the Federal government.