New Student Loan Legislation Helps Your Employer Pay Your Debt
You may have seen recent headlines about the hottest new employee benefit since the 401(k): student loan assistance. Whether it’s helping employees pay student loans or subsidizing an interest rate discount on student loan refinancing, a growing number of employers are offering some kind of student debt assistance as a tool to recruit and retain talent in today’s competitive job market.
What you may not know is that, beyond recruiting, your company doesn’t have a lot of incentive to offer a student loan benefit to you—at least right now. That’s because when companies help out with student loans, that assistance has a much different tax treatment than the 401(k) benefit.
Employer 401(k) contributions are generally tax-deductible for the company and tax-deferred for the employee (meaning employees don’t pay taxes on that amount until they take the money out at retirement). In the case of student loan assistance, not only is the employer’s contribution not tax-deductible for the company, it’s actually taxed as income for the employee. This makes it less attractive for companies to offer a student loan benefit—and less beneficial for their workforce when they do so.
Fortunately, a recently proposed student loan bill could change that.
The “Employer Participation in Student Loan Assistance Act” (also known as H.R. 3861) was recently introduced in both the House and Senate with bipartisan co-sponsorship. If the bill passes, it would bring the tax treatment of employer student loan contributions in line with the 401(k). This would make it more compelling—and likely more common—for employers to offer a student loan benefit.
If you have student debt, you’re probably already onboard with the idea of getting loan assistance from your employer. But here are just a few of the great things that could happen if H.R. 3861 passes:
-More employers would be likely to assist employees with student loans, since they would have a tax incentive to do so.
-Assistance from your employer would make more of an impact on your student debt, since you won’t be taxed on the contributions.
-As employees save money on student loans, they’d have more cash flow available to contribute to a retirement plan, buy a home, etc. This is not only good for the employee, but also great for the economy at large.
-The student loan default rate and delinquencies in the federal student loan program would go down.
-There would be less pressure on the government to solve the student loan crisis through costly loan-forgiveness programs and other legislation that burdens taxpayers.
Because of these advantages, and because we believe student loan assistance is a game-changing benefit for today’s debt-saddled workforce, SoFi strongly supports this bill and has met with Members of Congress to encourage them to pass this student loan bill. And you can help.
If you’d like to see employers offer student loan assistance alongside 401(k) and other HR benefits, you can help move H.R. 3861 forward in three ways: 1) encourage your employer to support the bill, 2) reach out to your Congressional representatives asking them to pass the bill, and 3) tweet your support with the hashtag #PassHR3861.
We hope you’ll help us make this bill a reality — because when employers help out with student loans, everybody wins.