Republicans Should Address Student Debt at This Week’s Philadelphia GOP Retreat
This week the House and Senate Republicans will meet in Philadelphia for their congressional retreat to discuss the top issues on the Republican platform for the 115th Congress. Let’s hope that the Republicans, who control majorities in both legislative chambers, will discuss options to help student loan borrowers.
Pennsylvania is ground zero for student debt. A recent report from the Institute for College Access and Success estimates that colleges in Pennsylvania have the second highest student debt numbers in the entire nation. More specifically, the data indicates that more than 70% of students that leave Pennsylvania colleges have student loans. The data also indicates that the average borrower from a Pennsylvania-based undergraduate institution has more than $34,900 in student debt.
Over the past decade, the student debt situation in America has more than doubled from $600 billion in outstanding loans to $1.3 trillion now. Before the problem gets worse, now is the time for the Republicans at the Philadelphia retreat to discuss a bipartisan and collaborative plan where employees, companies, and the government can join hands to tackle the problem as a team.
The solution we want Republicans to discuss is quite simple. Congress should encourage companies to help their employees with student debt by passing into law an annual tax exclusion on employer-sponsored student debt assistance plans. My company GradFin, which has an office in Philadelphia, is already working with several companies in the Philadelphia region to help their employees pay back their student loans. While many companies are stepping up by offering monthly student loan contributions to their employees through our GradFin portal, we believe many more companies will be eager to help if Congress changes the the tax treatment of student loan assistance.
The Aspen Institute recently released a report further adding bipartisan support to helping borrowers with student loans. Aspen’s Future of Work Initiative report called “Toward a New Capitalism” proposes to allow employees to use a portion of their annual 401K exemption to send to their student loan accounts. This makes sense because most young Americans can’t come close to this $18,000 annual 401K contribution and should be able to utilize part of it for their student loans. GradFin is honored to have participated in the working group to recommend this important proposal to the Aspen Institute.
As part of this discussion to reform the tax code, education, and benefit policies, it is extremely important that Congress takes action to align the U.S. employer benefit system with the demographics of the 21st century workforce. The top issue for many workers, especially the millennial generation, is to get access to benefits that are more targeted to their needs. GradFin has surveyed employees in various sectors and uncovered that 90% of workers with student loans prefer to work for an employer that offers student loan assistance.
Under the current tax code, employer student loan assistance plans are not treated the same as retirement plans or health care plans. While retirement and healthcare plans are mostly excluded from tax, student loan assistance plans are taxed as compensation. Removing this tax on student loan assistance would spur a massive shift in how companies can offer new benefit options to young workers that graduate with heavy debt burdens.
We think the time is ripe for action and the Republican retreat in Philadelphia offers this clear opportunity to prioritize innovative student loan policies. We know companies stand ready to help their employees wipe out their debt obligations. Now we are waiting for our Members of Congress to lead this important change.
Mr. Walters, who was born and raised in the Philadelphia area, is leveraging his 15+ years of public policy experience in our nation’s capital to foster fresh and innovative solutions for student loan borrowers. Mr. Walters founded GradFin in 2015, a financial technology company with the mission to help employees get out of student debt faster and start saving for the future.