The Employer Participation in Student Loan Assistance Act (H.R. 795), re-introduced by Republican Rodney Davis on February 1st, 2017, is seeking to allow tax-free student loan repayments to be made by employers. This bipartisan bill would amend Section 127 of the Internal Revenue Code, which presently allows an employee $5,250 exclusion from tax to cover such essentials as books, tuition, equipment and fees. Currently, student loan repayment benefits are not included and the $5,250 tax-free allowance has not been raised since inception.
The bill, which has been introduced to the House and referred to the Ways and Means committee, has support from both Republicans and Democrats in addition to prominent HR organizations such as the Society for Human Resource Management (SHRM). It would allow for employers to reimburse student loan repayments but it would fail to increase the amount the employer could offer the employee, which some employers wish to do as education costs are becoming more expensive.
Students of 2016 were reported to have graduated with the highest student loan debt in history, more than $35,000. Although they were able to borrow at historically low interest rates, more needs to be done to help pay down their debts as it is affecting the economy. Fewer people are managing to start their own businesses, make property purchases and especially for millennial employees, make retirement savings.
A small number of employers have already decided to begin offering student loan repayment assistance. This will help graduates pay down their loans more quickly and help businesses attract and retain young talent in their employment. Although the administration of this is an arduous and time-consuming labor for most companies, one California based company has begun offering loan repayment contributions of up to $6,000 a year for up to 5 years, as a benefit. Employees have to apply for this benefit within three years of their graduation. Millennials account for about 20 per cent of this company’s employees and so they are hoping to boost those figures by offering a benefit especially attractive to people of that generation.
