The private sector wants to participate in the student debt crisis in the United States
Companies are starting to play a role in reducing America’s growing student debt.
Why is this important: Widespread proposals for student debt relief have stalled in Washington. Companies are seizing an opening that also benefits them: a benefit that attracts workers – and in some cases, tax relief.
Catch up fast: A provision inserted into the original COVID-19 relief package provides a tax incentive to businesses that help pay employees’ student debt. It has since been extended until 2025.
- How it works: Companies can pay up to $5,250 annually on each employee’s student debt tax-free. (Employees won’t pay taxes on it, either.)
- Tuition assistance up to this amount was tax-exempt prior to the enactment of the federal relief program.
Yes, but“Many of the most vulnerable borrowers – including those who have lost their jobs during the pandemic – will not receive help from their employers,” says Sarah Sattelmeyer of the New America think tank.
- Implementing a program like this may be too expensive or time-consuming for some companies. (That’s if they know it at all.)
- To note : It’s unclear how many companies took advantage of the pandemic-era tax incentive. Before COVID-19, about 8% of companies offered student debt repayment, up from 4% in 2018, according to SHRM (the Society for Human Resource Management).
What they say“Companies are the beneficiaries of the education students have received. So we should be willing to help them reduce [student debt] — or pay for it completely,” Dan Rosensweig, CEO of Chegg, the online education company, told Axios.
- Chegg, known for its textbook rental service and other online services for students, launched a student debt repayment program in 2019 with $5,000 a year offered to company employees for at least 2 year.
- About $700,000 in total was paid out to the 146 program participants.
The backdrop: Employers are playing a bigger role in tackling college costs in an effort to attract workers and keep those they have from jumping ship.
- Walmart and Target have become the latest to cover tuition at some colleges.
And after: Pandemic student debt relief expires next year — following what the Biden administration has billed for “the final extension” to freezing federal loan repayments and defaulted loan collections.
