Students in Los Angeles protest the rising costs of student loans for higher education in September 2012. (David McNew/Getty Images)
By Ese Olumhense
Student loan debt now over $1.3 trillion
A bipartisan coalition of legislators is making a move on a bill that would enable companies to offer tax-free tuition assistance benefits to their employees in return for tax breaks.
Rep. Rodney Davis (R-Illinois), who in February introduced H.R. 795, the Employer Participation in Student Loan Assistance Act, held a news conference in Washington on Thursday regarding the proposal, which has garnered support from 30 of his Republican and Democrat colleagues. Davis was joined by co-sponsor Scott Peters (D-California), who, like Davis, has worked actively to address the “rising burden of student loan debt.”
“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 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.”
The bill would expand the Internal Revenue Code to give employers tax breaks for providing up to $5,250 yearly for student debt repayment; an employee receiving the benefit would not be taxed on those funds. It’s a setup not too different from the existing tuition assistance benefit, with the exception of the tax break for the participating employer.
Total student loan debt in the United States is now more than $1.3 trillion, shared by 44 million borrowers. Seven in 10 students borrow to attend universities, and the average class of 2016 graduate left college with $37,171 in loan debt — a new record — which is six percent higher than the average for Class of 2015 graduates.
Can a bill like this (finally) pass?
Davis and Peters have both tried unsuccessfully to introduce similar legislation before. The most recent bill, also sponsored by Davis, was introduced in 2015, but never became law. Peters also introduced a similar bill that year. But it failed.
Davis and Peters have now teamed up, and the bipartisan backing their proposal has secured is expected to increase its chances at passing.
Some companies, like Fidelity and PricewaterhouseCoopers, already provide these kinds of benefits to their employees. The incentives are primarily targeted at millennial hires — the sweeping majority of whom are saddled with student loan debt.
The most needy employees are least likely to benefit
The borrowers who need these incentives most, however, would not benefit from legislation like H.R. 795. Higher-earning employees at big corporations that can spare the expense are more likely to receive these benefits, while lower wage workers who have more difficulty repaying are less likely to work at companies offering this perk.
“ delivers public subsidies in an arbitrary and potentially unfair manner and would encourage employers to do the same,” Matthew Chingos, 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.”
The point is striking, considering the fact that 95 percent of jobs, even low-wage ones, created during the Great Recession’s recovery have gone to those with college experience.
This isn’t exactly a mind-blowing concept, as college graduates tend to be more competitive job applicants. But the playing field for those enrolled in college isn’t exactly even. Wealthy students, studies show, are eight times more likely to graduate than poor ones, who often don’t have the financial aid needed to finish their programs. With many jobs only available to graduates, the poor are more likely to be left behind, and the economic gap is more likely to widen.