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Dear Congressman or Senator,
I am writing to ask for your support of legislation that will help millions of Americans pay off their student loans faster. If Congress incentivizes companies to help pay their employees student loans, this could have an enormous impact on the economy by allowing people to spend money on other capital expenses purchasing homes and starting a business.
As a Member of Congress, please know that over 43 million Americans have student debt and the debt levels are now higher than $1.3 trillion in total. We need new solutions in the student loan crisis and one idea is to encourage American companies to offer employer student loan assistance plans.
H.R. 795 and S. 796 would encourage employers to help employees pay off their student loans. This bill would modify section 127 of the tax code to allow for a tax exclusion for employer student loan assistance.
H.R. 795, the Employer Participation in Student Loan Assistance Act (Congressman Rodney Davis and Scott Peters)
S. 796, the Employer Participation in Repayment Act of 2017 (Senators Mark Warner and John Thune)
These bills are bipartisan and we must act now to create new solutions to reel in the student debt in our nation.
Tax Equity to Help Employers Repay Student Loans
Under the U.S. Tax Code, there is a tax bias against "employer student loan assistance" programs. While the IRS provides favorable tax treatment for "tuition" assistance plans, the same benefit is not available for employer assistance of student loans. As more and more college grads are entering the workforce with huge loan burdens, it makes sense to encourage employers to help them pay this debt.
Congress should pass legislation to amend the tax code to allow employers to pay student debt without facing tax consequences on those payments. We encourage you to help us spread the word to your Member of Congress to pass legislation today to equalize the tax treatment of employer sponsored student loan assistance programs.
Legislation Under Consideration
H.R. 795 - Employer Participation in Student Loan Assistance Act
Sponsor: Congressman Rodney Davis (R-IL)
Summary of Legislation:
-Excludes up to $5,250 per year from taxes on employer payments of student loans.
-Equalizes the treatment of employer repayments of student loans with that of tuition assistance.
Text of Legislation
Benefits of Tax Exclusion for Employer Student Debt Repayment
-If an employers helps their employees with their student debt, the payment should go to the lender not the IRS.
-An employee in the 20% tax bracket is losing 20 cents for every dollar paid on behalf of their employer. This money is going to the IRS rather than to help a borrower pay down their loan.
-Over the course of a year, if a company repays $5000 of an employees loan, this could be $1000 in payments to a borrowers loan and not the IRS.
-Over 70% of graduates leave school with debt, and they need new solutions to help them pay off their debt.
GradFin is the Co-Founder of the Student Debt Reduction Coalition
The Student Debt Reduction Coalition is a organization in Washington with the mission to advocate for federal and state public policies that help student loan borrowers repay their loans faster. We are actively engaging at the federal and state level to push for solutions that help create employer student loan assistance plans and standards for financial education counseling.