U.S. Sen. Cory Gardner has introduced legislation that would allow employers to make up to $10,000 a year in tax-free contributions to their workers’ student debt payments, an effort the Colorado Republican says he hopes will spur more job growth and retirement savings.
“I would love to see colleges be able to reduce the cost of tuition,” Gardner told The Colorado Sun. “We have to continue to look at the cost of that. In the meantime, we’ve got to look at ways to help the debt situation now.”
He added: “We can’t wait any longer. I think this is something that can help now.”
The idea is to allow employers to make payments on their employees student debt similar to the way some companies fund 401(k) retirement savings plans. The bill gives businesses wiggle room to decide whether they will match the student debt payments of their workers or simply pay down the debt without the employee contributing.
Gardner says many young people can’t afford to save for retirement because of their student loan obligations. The hope is that with help paying down the education debt more quickly, young Americans can start saving for their post-work years earlier.
According to Nerd Wallet, more than 40 million Americans owe a combined total of nearly $1.5 trillion in student debt as of this year. That includes 37.5 percent of the nation’s population under 30 years old and 62.5 percent of those 30 and older.
“A significant portion of the American population has student loans, including me,” Gardner said.
The senator estimates he has less than $50,000 in student debt remaining from the degree he earned at University of Colorado Law School in 2001.
Gardner acknowledges the legislation would siphon tax revenue from the federal government.
“That will be one of the biggest obstacles that we have to overcome,” he said.
The hope, though, is that the economic growth spurred by the measure will make up for that lost tax base.
Gardner also sees the program as an incentive option for employers to attract employees and hopes it will lead to “higher earnings, a better educated workforce (and) more people willing to go to college.”
Self-employed people would also be able to make up to $10,000 a year in tax-free contributions to their student debt obligations. Those participating in the program would be barred from deducting their student loan interest payments from their taxes.