Two bills were recently introduced in the U.S. Senate to ease the burden of college loan repayment for students and their families.
U.S. Sens. Mark Warner (D-VA) and John Thune (R-SD) introduced the Employer Participation in Repayment Act, which would allow employers to make payments towards their employees’ student loan debt using pre-tax income. Currently, the Employer Education Assistance Program allows employers to contribute pre-tax earnings to help employees finance continued education, but does not allow pre-tax contributions for individuals who already have undergraduate or graduate student loan debt.
The Warner-Thune bill would allow employers to contribute up to $5,250 pre-tax to their employees’ student loans – providing relief for employees and a new tool to recruit and retain quality employees for employers.
“Now more than ever, college graduates often find themselves bogged down by massive student loan debt,” Thune said. “Our bill would give graduates the flexibility they need to work with employers to secure lower interest rates and pay part of their student loans back tax free. This is an obvious win for graduates, but it also helps businesses attract and retain talented employees.”
A second proposal, the Dynamic Repayment Act, introduced by Warner and U.S. Sen. Marco Rubio (R-FL), would make income-based repayment the default option for federal student loan borrowers. The bill will help borrowers avoid default during periods of low earnings.
The Warner-Rubio bill would make student loan repayment more manageable by replacing the array of loans, subsidies, deferments, forbearances, and repayment options with a single, streamlined, repayment plan that allows a borrower to pay an affordable percentage of his or her income until the loan is repaid. Student loan payments would be capped at 10 percent of a borrower’s income over $10,000.
“Our current federal student loan program is outdated and often leaves students and college graduates burdened with a significant amount of debt. This bill will ensure that people with federal student loans have affordable payments and stronger borrowing protections,” Rubio said. “As someone who once owed more than $100,000 in student loans, this issue is personal to me, and I will continue working to simplify this complex and bureaucratic student loan system.”
Americans now owe more than $1.4 trillion in student loans, outstripping credit cards and auto loans as the country’s leading source of non-housing debt.
“Student loan debt has a ripple effect in our economy, preventing people from taking chances that will benefit them, and the economy, in the long-run. We must do more to help younger borrowers, most of them at the beginning of their careers, manage their student loan debts better. And we should allow businesses to consider offering a new employee benefit to help their employees pay-off their student debts. These two bipartisan bills accomplish these goals while providing relief to the growing number of borrowers that are struggling with the crippling effects of student loan debt,” Warner said.