Policy Dreaming: How Congress Could Help Companies Tackle Student LoansSmarter Borrower
Student loans and education finance have been hot topics at the start of this year. Analytics provider TrendKite shows there were 19,227 stories or mentions in January 2017 alone.
Driven by big ideas like free college and a single repayment plan, the buzz has most individuals dreaming of real help. But, what does real help look like?
Here are a handful of less talked about ideas that could be this Congress’ key to helping employers reduce the burden that’s crushing the budgets of working Americans.
Make Student Loan Benefits Tax-Free for Employees
In the whitepaper “Toward A New Capitalism: A Policy Agenda To Restore The Promise of Work,” the Aspen Institute’s team researchers and policy experts offer this:
“We should encourage more employers to assist workers in paying down student loans.
Under current law, employers receive a deduction for any interest and debt payments made on an employee’s behalf. In contrast, employees must take into income as compensation any debt reduction paid for or interest payments made by their employer.”
In layman’s terms, the Aspen Institute’s team is highlighting the harsh reality that if an employer helps with your student loan payments, that help is taxed like a bonus.
While that doesn’t seem like a big deal to some, here’s the reality. For one of the 70 percent of recent graduates with student loans who makes $37,000, a mere $100 per month in help could raise his or her tax rate by more than $4,000 and/more than 10 percent, according to 2016 Federal Tax Rates.
If Congress were to make student loan repayment benefits tax-free, recent graduates struggling to make ends meet with starting salaries could save thousands at tax time.
Offer Employers a Tax Incentive for Helping Pay Down Student Loans
In addition to tax credits for employees, offering incentives to employers is another way Congress could help. In 2015, Representative Scott Peters from California introduced a bill that outlines just that. In simple terms, this bill would make employer contributions toward student loans tax-free/-exempt for employees who receive student loan assistance as an employee benefit.
These are just two of the big ideas out there for ways this Congress can help with student loans. If you’d like to see these bills come to life or help make the case for Congress, share your story below and we’ll help pass it along to your representative to let them know you want his or help crushing your student loans.