Student loan repayment benefits have become an increasingly popular tool for recruiting and retention in recent years and, if this bill passes, that trend is only likely to continue.
The bipartisan bill, The Employer Participation in Student Loan Assistance Act (H.R. 795), which was introduced by Rep. Rodney Davis (R-IL) and has an impressive 23 co-sponsors, would alter Section 127 of the Internal Revenue Code.
Currently, Section 127 allows employees to exclude up to $5,250 per year in employer-provided education assistance from their taxable income.
This tax break applies to tuition, fees, books, supplies and even equipment. Noticeably absent from that list: student loan repayment benefits.
And that’s what Davis’ bill aims to change. If the bill passes, the annual tuition reimbursement amount of $5,250 would also apply to student loan repayment benefits.
Where the bill stands
The bill was introduced in the House and referred to the House Ways and Means Committee and seems to have garnered support from both Democrats and Republicans as well as prominent HR organizations like the Society for Human Resource Management (SHRM).
Kathleen Coulombe, a SHRM senior advisor of government relations, commented on the bill by saying:
“Both Republicans and Democrats alike see the value in incentivizing student loan repayment. Expanding Section 127 is a natural fit, whereby employers are able to offer a unique flexible benefit, and employees are able to offset the cost of education and training.”
Coulombe went on to say that including student loan repayments in Section 127 of the Code “would assist employers in attracting employees — many of whom are Millennials — to the workplace.”
A growing minority
Currently, just three percent of employers currently offer student loan repayment benefits to employees.
But as we’ve reported previously, the growing interest and increased access to student loan repayment vendors makes it highly likely a boom is coming in this benefits area.
A number of firms like Tuition.io and Student Loan Genius have popped up recently to helps firms administer student loan repayment benefits.
Tuition.io, for example, offers an interface that employers can customize to handle payments and taxation requirement and Tuition.io handles everything else. Employees never touch the money; it goes directly from the employer to loan payment. According to Tuition.io, employers’ average per-paycheck contributions to workers’ student loans are generally in the $50-$200 range.