We continue to hear a common refrain from large and small employers: They are struggling to find enough workers to fill open positions. The United States now has 11 million job openings as of the last business day of October.
While employers grapple with attracting and retaining workers, young people in our districts have not let us forget about the overwhelming burden of student loan debt. According to data compiled by EducationData.org, 43.2 million borrowers hold an outstanding student loan balance that exceeds $1.7 trillion. On average, the typical borrower has $39,351 in student loan debt.
Even with the national student loan forbearance policy during the COVID-19 pandemic to blunt blows dealt by layoffs and pay cuts, the student loan debt balance increased by 8.28% last year. This crippling amount of debt inhibits consumer spending and holds back our economy. In our effort to rebuild America’s economic prosperity, it is clear we must get a handle on student loan debt.
As we debate in Washington how best to tackle student debt and remedy our country’s labor shortage, there is one solution already codified into law that can treat both problems.
We introduced the bipartisan Employer Participation in Repayment Act in 2019 to create a unique public-private partnership that incentivizes employers to pay down their employees’ student loans by making those loan payments tax-free.
Our bill was included in the CARES Act last year and extended for a five-year period in legislation passed last December. Our proposal lowers payroll tax obligations for both employers and employees by allowing employers to treat student loan payments the same as tuition assistance programs that many already offer across the country.
The federal government has incentivized businesses to help pay for their employees’ education for years. Section 127 of our tax code has allowed employers to pay for their employees’ tuition while they are working, up to $5,250 per year tax-free to the employee and employer. This has been an immensely successful way to help with tuition costs.
Now, employers can offer up to $5,250 per year of tax-free student loan repayment to their employees, just like tuition assistance programs. To participate, the Internal Revenue Service requires employers to create a written educational assistance program plan for their employees, similar to the requirement for the tuition assistance benefit.
Recent studies have shown employer-provided student loan repayment assistance has tremendous long-term benefits. If an employer contributes just $100 per month toward an employee’s student loan debt, it can shorten a 10-year loan by more than three years, saving over $4,000 in interest.
Thanks in part to support from the business community, we were able to get our legislation signed into law. Now, we are asking business leaders to step up and consider offering this benefit to employees.
With the U.S. Department of Education restarting student loan payments on Jan. 31 after a pandemic-induced pause, now is the perfect time for employers to consider this benefit for their workforces. Employers will find this benefit a win-win to attract and retain workers, provide debt relief, and help our nation reduce our student debt crisis.
U.S. Rep. Rodney Davis represents Illinois’ 13th District and serves on the Committee on House Administration, the House Committee on Transportation and Infrastructure, and the House Committee on Agriculture. U.S. Rep. Scott Peters represents California’s 52nd District and serves on the House Budget Committee, the House Energy and Commerce Committee and the Joint Economic Committee.
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