Employers can help with student debt

Tax breaks would incentivize firms to provide aid

AS THE STUDENT DEBT CRISIS worsens, elected officials are turning to college affordability as their primary policy solution. New York is implementing tuition-free public higher education through its Excelsior Scholarship, and our neighbors to the south are close to making two years of college free through the Rhode Island Promise Scholarship. Right here in Massachusetts, legislators are considering establishing a Finish Line Grant that would cover one year of tuition and fees at a public college or university.

Tuition-free college is great news for current and future students who can avoid taking out large loans, but what about the 44 million Americans who already hold more than $1.3 trillion in student debt? To fully address the crisis, we need solutions for the students of today, tomorrow, and yesterday. That’s why it’s refreshing to see Massachusetts lawmakers from both sides of the aisle support tax incentives to encourage employer participation in student loan repayment.

According to a December 2016 report by the Massachusetts Budget and Policy Center, the Commonwealth has cut higher education spending by 14 percent since the 2001 fiscal year, which translated into a 31 percent cut in spending per student. To no one’s surprise, tuition and fees rose as a result and many families turned to student loans to fill the gap. In fact, the 2014 report of the Joint Committee on Higher Education’s Subcommittee on Student Loan and Debt found that the amount of student loan debt for graduates of Massachusetts public colleges and universities had increased by 27 percent over the prior three years.

A recent survey conducted by American Student Assistance shows that workers aged 22 to 33 who have student debt are now feeling the squeeze. More than half reported worrying about repaying their student debt either, while 40 percent are concerned their student loans have impacted their health. Further, more than three out of five young workers say their priority is paying off student loans and not contributing to a 401(k) or other retirement plan, which could mean greater financial insecurity down the road.

Meanwhile, nearly 90 percent of young employees in the American Student Assistance survey say they would commit to a job for five years in return for help with their student loans—a fact not going unnoticed by employers. Recognizing that stress over student debt can lead to a loss of productivity in the workplace, more and more employers are offering to help reimburse employees for outstanding student loans—a benefit that doubles as a means to attract and retain young people, especially in states like Massachusetts with a high cost of living.

But while the list of employers offering this type of benefit is slowly growing, the concept has yet to gain wide traction. In the same American Student Assistance survey, 75 percent of human resource managers said that their company does not offer any guidance or assistance regarding student loans. Meanwhile, the Society of Human Resource Management reports that only 4 percent of companies nationwide offer student loan reimbursement. The simple reality is that many employers will find it economically impossible to offer student loan assistance without the help of tax incentives.

Two bills filed with the Massachusetts Legislature this session would address this problem by mimicking the tax incentives in place for tuition reimbursement, an employee benefit that is already quite popular. The bills would provide a tax deduction to employers who help employees repay their student loans. They would also exclude the benefit from the employee’s taxable income.

Student loan debt reduction programs provide employers and employees with a foundation for economic stability. Offering a tax incentive to employers to provide student loan relief will help strengthen the economy, prevent any brain drain of local college graduates, and grow the tax base. It will also ease the burden and stress placed on employees by large amounts of education debt, freeing them to save for retirement or homeownership and fully participate in the economy as consumers. 

Meet the Author

Julie Lammers

Managing director of consumer advocacy and government relations, American Student Assistance
Meet the Author

Eileen M. Donoghue

Senator, Massachusetts Senate
Meet the Author

Paul Mark

Representative, Massachusetts House
Bills creating tax incentives for employer participation in student loan repayment have been introduced on the federal level, but the prospects for bipartisan solutions in our fractured Congress diminish every day. Massachusetts lawmakers should embrace this opportunity to be a leader in addressing the student debt crisis. There’s no one silver bullet that will magically solve the problems of college affordability and student debt, but incentivizing employers to offer student loan repayment programs will help ease the struggle. It’s time for Massachusetts legislators to work together to get it done.

Eileen M. Donoghue is a state senator from Lowell, Paul W. Mark is a state representative from Peru, and Julie Lammers is the managing director of consumer advocacy and government relations at American Student Assistance.