Earn A Break From That Student Loan
It’s true. Sometimes imitation is the greatest form of flattery. Let me take a step back and explain.
Recently, Reps. Rodney Davis (R-Ill.) and Scott Peters (D-Calif.) introduced a bipartisan bill that would provide companies with a tax break if they contributed money to employees for the repayment of college debt. The cap for the tax break is $5,250.
This isn’t a completely new idea, but rather a thoughtful extension of a benefit that a few businesses and individuals both practice. Currently, only 4 percent of companies surveyed by the Society of Human Resources Management last year extended this perk to their employees. That said, the concept of having employers help their workforce pay down student loan debt is one of the most popular employment perks slowly beginning to take hold in corporate America.
It is common knowledge that strategically minded companies help pay tuition benefits for their employees. It’s a great morale booster, an economic plus for the student, and the employer benefits because the student has exposure to more training and presumably is more knowledgeable in the workplace.
The other side of the coin is that students, who are employed and have student debt, see these incentive programs as an attractive retention tool by their employer. The average college debt is $30,100, according to a recent story published by USA Today. It is a burden that can be particularly onerous when you’re just starting out. Might not it make sense to give students a boost upward with a tax break, while they stay gainfully employed by the company that has shown strong interest in their progress?
I, along with Assembly Majority Leder Lou Greenwald, recently introduced a proposal to try to reshape New Jersey’s tax code to mirror what is an enterprising move at the national level. Our initiative, A4271, would allow a gross income tax deduction for employees for amounts paid by employers for certain education programs for employees and for employees’ and their student loans. The limit would be $5,250 annually. Our challenges in crafting this legislation it to make sure that both low and high-wage employees can benefit from this initiative, as well as making it attractive enough for a wide variety of companies to set up these programs on behalf of their workforce. Through our committee process we will continue to refine this idea and seek to address those areas.
It’s important to note that this isn’t some giveaway to college graduates. It is an added benefit to employees and employers alike because it establishes a “financial wellness” program for employees. These forms of tax-free assistance can aid employees in meeting their current costs of pursuing their higher education goals while they hold a job, and can also help address high student debt burdens facing the college-educated workforce. An additional benefit to the government is that it could potentially save money on student loan defaults.
Further, while we pay frequent attention to the need for recruiting talent, we must also retain the talent after recruitment. “The private sector is calling for us to do this,” said Rep. Davis, in a Washington Post article. “The private sector wants us to give them another tool they can use to lure and hire the best talent.” He is correct. And his bipartisan bill and the one we have introduced in New Jersey are components, along with compettive wages, of that approach.
Let me get personal. That average student debt isn’t just someone who’s a name in a news article. It could be someone you know a neighbor or a relative or, yes, even your son and daughter. By providing them with a helping hand, you accomplish several things. First, they are more likely to stave off any bankruptcy or nonpayment because the person lacks the funds. Second, it keeps the former student in the job market working and paying taxes. Microeconomics at its best, but it’s still important. Third, it builds faith and trust on behalf of the employer in the workplace and hopefully more than a dose of loyalty. Studies show that salary alone is down the list of why people leave their employers. And the culture and benefits of why they stay are also a reason for not jumping ship for relatively minor raises. And if your company helped ease that pesky tuition payment, well, isn’t that good for all of us?
That’s my take, what’s yours?