U.S. Reps. Rodney Davis (R-Ill.) and Scott Peters (D-Calif.) Thursday introduced new legislation amending IRS Code to extend the tax exclusion for employer-provided educational assistance to include payments of qualified education loans by an employer to either an employee or a lender.

The Employer Participation in Student Loan Assistance Act (H.R. 795) encourages employers to be part of the solution of the nation’s growing student debt problem by allowing them to offer a tax-free employee benefit that will help graduates pay down their loans, says Davis. Many companies already see the attraction and retention payoff for providing such a benefit, but “we want to encourage more to participate so we can help both struggling graduates and our economy,” Davis says.

See also: Number of employers offering student loan repayment benefit grows

H.R. 795 would provide employees a tax-exempt benefit of up to $5,250 per year to pay on their already incurred student loan debt.

“Seven in 10 college seniors last year graduated with student loan debt, which now represents the second highest form of consumer debt,” Davis adds. “This debt is a drag on our economy because it prevents many young adults from contributing to our economy.”

Just as allowing employers to offer tax-free tuition assistance has enabled more Americans to advance their education, offering this same incentive for student loan payments will speed up the repayment process so that graduates can begin to make investments such as buying a home, starting a family, or saving for retirement, Peters notes.

“Expanding Section 127 is a win-win for employers and employees,” Kathleen Coulombe, senior adviser at the Society for Human Resource Management, said in a statement. “It allows employers to attract and retain top talent, while providing employees with valuable assistance to offset the cost of their education.”

“This is a great first step to encourage employers to help the millions of Americans who owe student loans manage that debt a little easier,” adds Julie Lammers, managing director of consumer advocacy at American Student Assistance, a Boston-based nonprofit dedicated to eliminating finance as a barrier to education. “Employers are one of the primary beneficiaries of a highly educated workforce, and we should find ways to encourage employers to become a solution to the problems associated with taking on student debt in order to get ahead in today’s job market.”

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