U.S. Rep. Rodney Davis (R-IL) announced legislation that would encourage private employers to offer a tax-free benefit that employees could put toward student loan debt.
Davis and U.S. Rep. Scott Peters (D-CA) announced their bipartisan legislation, the Employer Participation in Student Loan Assistance Act, H.R. 795, during a press conference on Thursday.
Seven in 10 college seniors graduated with student loan debt last year, which now represents the second highest form of consumer debt.
“This debt is a drag on our economy because it prevents many young adults from contributing to our economy,” Davis said. “Many are putting off buying a house, purchasing a car, or saving for retirement.”
“Some companies are already offering this benefit because they see the advantage it gives them when recruiting and retaining younger employees but we want to encourage more to participate so we can help both struggling graduates and our economy,” Davis added.
Under the bill, employees would receive a tax-exempt benefit of up to $5,250 per year to help pay for student loan debt that they’ve already incurred. In exchange, employers would be able to deduct subsidies provided to students under the program.
Leaders of Tuition IO, the nation’s first employer-funded student loan contribution platform, have endorsed the legislation.
“The impact of The Employer Participation in Student Loan Assistance Act is immediate and highly tangible: employees get the full benefit, pre-tax, exactly the way they should,” Scott Thompson, the CEO of Tuition IO, said.
“Adding tax relief to the equation could elevate student loan assistance alongside 401(k) contribution as one of the most valuable financial benefits a company can offer its workers that directly impact their quality of life today,” Thompson said.