Savvy HR managers should know about the proposed legislation in Congress that will impact what is proving to be one of the hottest new employee benefits, Student Loan Repayment Assistance.
Last month, Representatives in the House introduced H.R. 795, the Employer Participation in Student Loan Assistance Act to help address the rising student debt crisis.
A version of the new bill is about to be introduced in the Senate by Senators Mark Warner (D-VA) and John Thune (R-SD), which is likely to put this legislation on the fast track.
The bipartisan bill engages private employers and encourages them to offer a tax-free benefit to put toward an employee’s student loan debt, similar to the existing tax benefit for tuition assistance.
This bill amends the IRS code to extend the tax exclusion for employer-provided education assistance to include payments of qualified education loans.
There has been a groundswell of rising interest in and support for employee student loan repayment assistance as a way for today’s employers to increase employee retention and engagement. Adding tax relief to the equation could elevate student loan repayment assistance alongside 401(k) contributions as one of the most valuable financial benefits a company can offer its workers, especially for heavily-indebted millennials who now represent 50% of the total workforce.
While there have been several attempts at passing similar legislation in the past, there are reasons to believe this time will be different.
Last year’s presidential election brought the $1.4 trillion student loan crisis to the national stage. It has moved beyond a “millennial only issue” and affects every part of the work force as more baby boomers are taking on student loans for their children.
Legislators on both sides of the aisle are keenly aware of the problem and its drag on the overall economy.
Young professionals are putting off buying homes and cars, saving for retirement, and are less likely to start new businesses because of the burden of their student loans.
As a result, the new bill put before the House Ways and Means Committee has true bipartisan support, with 46 co-sponsors from 16 states.
Today’s Republican-controlled Congress has a strong impetus to show they can get things done that benefit all Americans, and this legislation would provide them with a clear win on an issue publicly supported by Democrats as well.
While student loan repayment assistance is a relatively new benefit, the early results point to a significant increase in employee retention.
Trailblazers such as Fidelity, Staples, HP, and Live Nation that now provide student loan repayment assistance are experiencing strong participation rates and positive feedback from employees and HR professionals alike.
Most notably, the impact of loan repayment is highly tangible and its value is immediate and ongoing: employees get to see their level of debt reduced every month.
By providing a benefit that employees can see and feel every day they come to work, student loan repayment assistance is a powerful new weapon in companies’ arsenal to improve employee acquisition, engagement, and retention.
With the support behind H.R. 795, odds are increasing that someday soon this benefit will become tax free. Once that happens, businesses large and small across America will have no reason not to put it on the menu.
Now is the time for the most forward-thinking benefits managers to get up to speed on student loan repayment assistance and firms that help implement and manage student loan assistance programs.