Why employers may want to help pay off college loans

Personal Finance

Chris Walters, chief executive officer of Gradfin, another student loan repayment and management tech platform, said the tax code is keeping plenty of interested employers on the sidelines.

“If an employer contributes $100 a month toward student loan repayment, it costs $107.65 a month because it is treated as compensation and requires paying the employer share of the payroll tax,” Walters said.

Moreover, the benefit is taxable to the employee as compensation.

“It’s going to take a change in the tax code to see large growth in the benefit,” he said.

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Bipartisan bills in the House and Senate would put student loan repayment assistance on par with employer tuition assistance, which currently allows employers to give employees up to $5,250 a year tax-free for tuition costs.

The cost of that tax break likely makes for some tough sledding in this current Congress. Walters says that’s missing the bigger picture.

“The federal government, meaning taxpayers, are already losing plenty in terms of defaulted student loans, and income-based plans that will be forgiven,” he said.

“Congress should be worried about those losses. If the private sector comes in and improves debt repayment the Federal government is going to get paid more.”

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