Will your employer help you with student loans?
Image by Dylan Gillis via Unsplash
With student loans a growing crisis for many consumers – and the economy in general – the search for a solution is ongoing and intensifying. If you can’t afford your payments, or can but they’re causing a bite in your budget, you may want to take notice of a new piece of legislation. A new bill introduced on October 11, 2018, by Senator Cory Gardner (R) encourages employers to chip in and help their employees pay off their student loan debt.
S 3595 Student Loan Repayment Acceleration Act
The new bill, called the Student Loan Repayment Acceleration Act, would allow companies to contribute up to $10,000 each year towards employee student loan burdens. The law would treat employer contributions as a bona fide business expense that companies could deduct from their corporate income taxes while not increasing employee tax burdens.
Most importantly, employees would get help with their student loans on a tax-free basis. The proposed law wouldn’t count the employee-student loan assistance as part of the consumers’ taxable income. That’s a double advantage since it lower student loan balances without driving up income and Social Security taxes.
Under the bill, employers can choose how they want to help their employees repay on their loans. One of the available structures is a contribution program, similar to a 401(k) match. Under this option, the employer can match any amount the employee pays towards the student loan, up to $10,000 a year.
Student loans out of control
Consumer debt is a big problem in America, with student loan debt the far-away leader and growing on a daily basis. According to the Federal Reserve, 44 million Americans owe a combined $1.5 trillion in student loans. The money spent to service this debt could be spent boosting the economy instead and allowing graduates to start their adult lives.
Many say they’re putting off buying a home or auto, getting married, or starting a family because of student loans. People also let student loan debt dictate their choice of the employer, so they’re not able to follow their dream and instead must follow the greatest earning opportunity. With this new legislation, it would add options to allow employers to attract student loan debtors.
Some employers already offer student loan help
Employer-assisted student loan repayment is nothing new although it’s not widespread. Several companies have established student loan benefits over the past few years. And employer-student loan assistance schemes are increasingly favorable tools to attract and retain top talent to companies now that the job market is so much more competitive.
Some of the big companies that offer student loan help to employees include PwC, Aetna, Carvana, Peloton, and Fidelity Investments, to name a few. If this new law passes, more employers might establish programs to help given the tax advantages on top of the chance to use this benefit plan to find and keep the best employees.
Current tax treatment of student loan assistance
As of now, if your employer helps with your student loans, any money they contribute can be seen as income. That means both you and the company will pay employment taxes on that amount. Plus, you’ll pay income taxes. However, these new plans propose to treat student loan contributions by employers the same way as 401(k) match contributions.
Similar legislation in House and Senate
There is parallel legislation on student loan repayment in the House of Representatives and Senate on this matter. If a student loan repayment plan does make it through Congress, it could benefit employers, employees, and our economy. Student loan debt stress can be a distraction at work that kills productivity and affects performance.
For those struggling with student loans, this legislation could be life-changing. If this isn’t the answer for you, income-driven repayment could help, and bankruptcy might be another path to student loan debt relief. To find out more, read reviews from clients, then call us at +1-888-234-4190.
Contact the Law Offices of John T. Orcutt to schedule a free student loan bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.