With healthcare now in the rearview mirror, all eyes are on tax reform. In what seems like a sea of partisan rancor, one beacon of bipartisanship has emerged: employer participation in student loan assistance.
Student debt is one of the biggest financial hurdles in the United States. The newest generation of college graduates carries more than six times as much debt as their parents, and wages for young people have only increased at a rate of 1.6 percent over the past 25 years. Student debt is now $1.4 trillion and continues to rise — an unsustainable trend that acts as a drag on the overall economy.
{mosads}Even if a graduate does everything “right” — attends his or her dream school, makes smart decisions about the amount of debt he or she takes on, lands a job with a steady income — he or she will likely have to make payments, often hundreds or thousands of dollars monthly, for a decade after graduation. One of the groups hit hardest by this is the middle class, with an income too high for substantial need-based financial aid and too low to afford college without taking out loans.
I learned about this dilemma firsthand when I decided to attend business school, which I knew I would have to fund entirely with student loans. I was shocked by the high rates, poor service, and lack of support to reduce my student debt. I didn’t finish my MBA program — instead, I built a company that uses technology and data to make student loans more manageable.
The pressure to obtain a bachelor’s or graduate degree to achieve career success is only getting stronger. U.S. companies are the most innovative in the world, and they rely on the skills and creativity of the most educated pool of workers in the world. Nearly a third of employers have increased their educational requirements over the last five years. These skills come at a steep cost to students, who often spend the better part of their careers paying off the debt required to access job opportunities.
It’s clear that employers, and our economy, benefit from a highly-educated workforce. But with seven out of ten members in the Class of 2017 graduating college in the red, it might just be high time for employers to get involved in the path to pay off student debt.
CommonBond was one of the first companies to help its employees pay off their student debt faster, and we’ve seen the impact that this benefit has had on our team’s well-being and overall retention. It’s also served as a compelling recruiting tool for talent. We’re finding that more and more companies want to provide student loan benefits to their employees. And the data supports it — while only four percent of employers currently offer student loan repayment as a workplace benefit, that share is expected to jump to 26 percent by 2018.
Student loan repayment also helps retain younger employees for a longer period of time. A recent study found that 86 percent of young employees would commit to an employer for five years if they helped pay their student loans. With the annual cost to the economy of millennial job turnover at $30.5 billion, there is significant savings potential from employer student loan assistance.
A bipartisan group in Congress recognizes the tremendous opportunity for employer student loan assistance to help Americans struggling with student debt. In early March, Reps. Rodney Davis (R-Ill.) and Scott Peters (D-Calif.) introduced the Employer Participation in Student Loan Assistance Act (H.R. 795) to modernize the tax code and encourage employer student loan support. The bill at last count had 50 co-sponsors, and is well on its way to making student loan repayment more accessible and attainable for any company.
H.R. 795 incentivizes companies to help pay off their employees’ student loans by granting a similar tax treatment for employer student loan assistance as what currently exists for employer tuition reimbursements. Under this bill, an employee who receives up to $5,250 in employer student loan assistance in a year would receive that benefit tax-free. Any employer would be able to use this benefit, from a small non-profit to a large corporation.
Employers have benefitted from remarkably talented employees for many years, and now with H.R. 795, they have an opportunity to take a leading role in the solution to our nation’s $1.4 trillion student debt problem. Employer student loan repayment isn’t just a new way to attract and retain top talent. It’s a way to improve the financial futures of today’s workforce.
David Klein is the CEO and co-founder of CommonBond, an online lender that uses data and technology to lower the cost of student loans.
The views expressed by this author are their own and are not the views of The Hill.