A bi-partisan bill allowing employers to offer tax-free student loan repayments to employees was introduced on February 1 by Rep. Rodney Davis, R-Ill to amend Section 127 of the Internal Revenue Code.
As it stands, Section 127 lets employees receive up to $5,250 in tax-free income for educational assistance for tuition, fees, books, supplies and equipment. If the new bill is passed, it will also include student loan repayments.
Employers are busy trying to attract and retain top talent in their industry and offering student loan repayment as a part of their benefits plans is a current trend. In fact, Forbes names it one of the hottest employee benefits of 2017. This new bill will support employers seeking to utilize this benefit to recruit millennials.
If this new bill passes, employees would receive tax-free income up to $5,250. However, many argue that amount needs to be increased. Employers would need to monitor and provide the same amount to both employees seeking student loan repayment and tuition assistance.
Section 127 does not demand that employers offer this benefit to their employees, but for businesses that do take advantage of the law, they are required to offer it to all their employees. Employers should carefully consider their workforce and determine if using Section 127 is right for them.
The bill has received 23 co-sponsors and a number of organizations, like the Society for Human Resources Management (SHRM), are supporting it. Even Republicans and Democrats seem to come together to support the passing of the bill. SHRM’s senior advisor, Kathleen Coulombe says, “Both Republicans and Democrats alike see the value of in incentivizing student loan repayment. Expanding Section 127 is a natural fit, whereby employers are able to offer a unique, flexible benefit, and employees are able to offset the cost of education.”
One of the biggest setbacks for many students seeking continued education is the cost. Many believe this new law will encourage more students to attend college, and at the same time increase retention rates for employers.
The average debt of the graduating class of 2016 was $37,172, and as a nation, there is nearly $1.3 trillion in student loan debt. The majority of those shouldering this loan are millennials, the largest group in the workforce according to a 2015, Pew Research Center shows. Thus, this new law could help employers attract and retain a group that is dominating the workplace.
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Andrew is a marketing Communications Specialist for Zuman, the one solution for HR, payroll, and benefits administration that supports growing small to midsize businesses.More Content by Andrew Larsen