Paying back college loans is a major concern for graduates joining the workforce. However, according to the Society of Human Resource Management, only 4% of its employer members offer student-debt repayment assistance.
Rep. Rodney Davis, R-Ill., is trying to increase that percentage. He’s one of the sponsors of the Employer Participation in Student Loan Assistance Act, proposed legislation that would give employers a tax break for offering student-loan assistance benefits. He recently spoke with Employee Benefit News about his bill. The following is an edited version of the conversation.
Employee Benefit News: Why student debt? Why is this issue so important?
Rodney Davis: I don’t think student debt gets enough attention for what it means to our economy — and what it means to taxpayers if graduates default on their loans. Scott Thompson, CEO of employer-student-loan benefit company Tuition.io, says that student debt today is equal to the amount of auto loan debt and consumer credit card debt combined. I don’t think too many Americans realize it’s that high. And if we don’t address this problem — by offering a private-sector voluntary approach to help graduates pay down that debt — then I think we’re possibly looking at the next bubble that could burst in the American economy.
EBN: What does the bill do?
Davis: The bill adds provisions to the tax code to incentivize private companies to set up student loan repayment programs. The bill would give employers a tax deduction for giving employees $5,250 for student-loan repayment. And the biggest benefit is that the employee would not have to pay taxes on it.
I think we ought to incentivize employers to help new employees pay down their debt so that these people can start saving for a house, being part of the economy, not just paying debt down.
EBN: Has there been support for this bill from your colleagues in Congress?
Davis: We have more than 100 cosponsors — a very bipartisan group. This is an issue that doesn’t have just a Republican solution or a Democrat solution.
EBN: What has the employer reaction been to the bill?
Davis: You know, most of the employers I talk to would love to offer something like this as a benefit. I don’t think it’s a bad thing to incentivize them to do so. I’m sure there are some naysayers out there, but I’m sure there were naysayers when the 401(k) program was created.
Student loan debt, as you see in all polling, is the biggest concern for millennials and new employees who are getting into the workforce today.
And look at the numbers: There were 1.3 million college grads, I believe, in 2012 and 153,400 of them defaulted on their loan, which averaged $30,000. If you do the simple math, that’s more than $4 billion that is now on the backs of the government, on the backs of taxpayers. This is a fiscal problem for our country that I don’t think it gets enough attention.
EBN: What can employees do to help support the bill?
Davis: Reach out to their members of Congress. Talk to them about making sure we add provisions like this into tax reform. Being able to address the ever-increasing amount of college debt that we see is an important issue for families; it’s an important issue for employees getting into the workforce.
And when we address that debt issue, then we can address more effectively the front-end college cost issues that many families are facing.
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