In-Depth: Sen. Cory Gardner (R-CO) reintroduced this bill from the 115th Congress, which is based off the current format many employers use to contribute to employees’ 401K plans, to allow employers to make tax-free contributions of up to $10,000 toward employees’ student loans each year. When he introduced this legislation in the 115th Congress, he said:
“Student loan debt makes it harder and harder for graduates to get ahead. I’m hopeful my legislation can make it easier to pay off loans by allowing employers to contribute to their employees’ student loans like many do for 401k plans. Every little bit helps and this can be a model for further policies to deal with the growing problem of student loan debt.”
Rachel Beck, vice president of the Colorado Springs Chamber and Economic Development Corporation, expressed support for this legislation as a way to support her area’s high demand for highly-skilled workers in the 115th Congress:
“Th[ere] are jobs that require a lot of education, and a lot of education means a lot of debt. So we are, in the Pikes Peak Region, potentially looking at a lot of employees that could benefit from this proposal… If you’re an employee, and you’re comparing two different job offers, and one of them includes another $5,000 to $10,000 benefit, that’s a pretty significant boost for one over the other.”
Wayne Thorsen, SVP of marketing and brand partnerships at SoFi, argues that student loan assistance should be a “401(k) of the future”:
“People often face a hard choice between saving for retirement or paying down student debt when the answer is they should and can do both. We think about this employee benefit as a 401(k) of the future… The Millennial generation, now the largest percentage of the workforce, are starting their careers with record-setting student loan debt and deferring important priorities like retirement savings or buying their first home.”
A number of companies, including Fidelity, Hewlett-Packard Enterprises, PwC, Esté Lauder, Abbott, and IBM, already offer some form of student loan assistance. Increasingly, companies are using student loan assistance as a benefit to attract job candidates.
Rep. Julia Brownly (D-CA) introduced legislation similar to this in 2017. Her bill, which would have created a special business tax credit for employers who try to help their workers pay off their debts, went nowhere, largely due to concerns about the reduction in federal revenue that would be produced by this legislation.
This legislation doesn't have any cosponsors in the current Congress, nor did it in the 115th Congress (where it didn't see committee action).
In the current session of Congress, 2020 Democratic presidential hopefuls have introduced a number of bills that would cancel student loan debt. Two of the major proposals have come from Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT). Sen. Warren’s Student Loan Debt Relief Act of 2019 (S.2235 / H.R.3887) would cancel student loan debt for over 95% of borrowers, including entirely canceling student loan debt for over 75% of Americans with student loan debt. Sen. Sanders’ Student Debt Cancellation Act of 2019 (S.1947 / H.R.3448) would go a step further, cancelling all student loans held by the Dept. of Education.
Of Note: According to the National Association of Realtors, about 45 million Americans have student loans to repay. In 2014, seven out of 10 college graduates had student loan debt. The average student has around $30,000 in debt, and a fifth of those with student loan debt owe over $100,000. Collectively, Americans owe a record $1.5 trillion in student loans, according to Federal Reserve data from the second quarter of 2018.
The New York Fed Reserve reports that over 7.8 million borrowers (17% of all student debtors) own $50,000 or more on their student loans. The average debt load of those who completed a master’s of education degree from 2015-16 was $55,200; for a master of science, it was $62,300. And of those pursuing any kind of advanced degree, Black and Latinx graduates are the most likely to have borrowed $50,000 or more. Student loan debt also affects parents. As of 2014, 13% of parents with Parent PLUS loans owed over $50,000 and 4% owed over $100,000.
Today, the average U.S. household has 828% more student loan debt than in 1999, and student loan debt is the leading type of debt for American households.
Summary by Lorelei Yang(Photo Credit: iStockphoto.com / BrianAJackson)