Student Loan Repayment Legislation Proposed
Author: Robert S. Teachout, XpertHR Legal Editor
March 18, 2019
With tens of thousands of workers entering the labor market with student loan debt, Congress has introduced legislation to increase the ability of employers to provide student loan repayment benefits to their employees. The federal government estimates that there are 44 million Americans with a total student debt load of more than $1.5 trillion.
Congress recently introduced the Employer Participation in Repayment Act (HR1043/S460) with bipartisan support. If passed, it would amend the tax code to include student loan repayment as a type of tax-free education assistance.
Section 127 of the IRS Code allows employees to exclude from income up to $5,250 per year in employer-provided education assistance for courses at the associate, undergraduate and graduate levels. Specifically, the bill would expand the tax exclusion for employer-provided educational assistance to include payments of qualified education loans by an employer to either an employee or a lender.
In addition, the Upward Mobility Enhancement Act will be reintroduced. It would increase the amount of the exclusion allowed under Section 127 to $11,500 per calendar year and index it for inflation. The $5,250 exemption limit has not been increased since the law was first enacted in 1978.
Providing tax-free education benefits to employees is one tool employers use to attract and retain employees and build a skilled workforce. However, when employers offer a benefit giving student loan repayment dollars directly to employees, those payments currently are treated as taxable income, leading employers to look for other solutions. Recently, the IRS issued a private letter ruling approving an employer's proposed program to add a student loan benefit to its 401(k) plan, which would make those contributions nontaxable.
A wide array of industry and union groups are supporting the legislation, including:
- The United Auto Workers;
- Associated General Contractors of America;
- The National Council for Advanced Manufacturing; and
- The National Association of Independent Colleges and Universities.
In addition, the Society for Human Resource Management (SHRM) is including the bills as part of its advocacy efforts during the SHRM Employment Law and Legislative Conference being held in Washington, DC this week.