EASING THE BURDEN OF STUDENT LOAN REPAYMENT ACCELERATING STUDENT LOAN REPAYMENT THROUGH EMPLOYER PARTICIPATION

JIMMY SENGENBERGER

POLICY WHITE PAPER DECEMBER 19, 2019

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Millennial Policy Center Policy Paper December 19 | 2019

EASING THE BURDEN OF STUDENT LOAN REPAYMENTACCELERATING STUDENT LOAN REPAYMENT THROUGH EMPLOYER PARTICIPATION

JIMMY SENGENBERGER

ABOUT THE AUTHOR

A special thanks is due to Mr. Keith Nobles, National Security Policy Advisor; Major Clifford Andersen, U.S. Army Special Forces Ret.; Dr. Robert Margesson, Ph.D., Regis University professor; and Mrs. Michelle Stinnett for their input and time in reviewing and offering suggested revisions for this paper. And our utmost gratitude goes to U.S. Sen. Cory Gardner (CO) and U.S. Rep. Rodney Davis (IL-13) for taking the time to appear in our accompanying video about the legislation discussed in this policy paper.

Jimmy Sengenberger serves as Chairman, President, and CEO of the Millennial Policy Center. Jimmy is also a seasoned radio talk show host on Denver's News/Talk 710 KNUS and has been published in a number of national and Colorado-based publications. He is a 2011 graduate of Regis University, Summa Cum Laude, with a degree in Politics and a minor in Economics, and also spent nearly three years as a legal assistant.

The Millennial Policy Center is a research and educational institute (a think tank) dedicated to addressing public policy issues that affect the Millennial Generation (born 1981-1997) and to developing and promoting policy solutions that advance freedom, opportunity, and economic vitality for Millennials throughout the United States.

Our vision is an America which realizes the full potential of Millennials – economic progress and achievement, individual liberty, and full participation in American society – to generate a new era of freedom, opportunity, and prosperity.

In collaboration with our policy advisors and policy fellows, the Center generates and shares knowledge, and it fosters public debate and understanding through various mediums.

For more information please visit our website: WWW.MILLENNIALPOLICYCENTER.ORG

ABOUT THE MILLENNIAL POLICY CENTER

ACKNOWLEDGMENTS

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There is no doubt that student loan debt continues to be a problem of epic proportions. A 2018 study by

the Brookings Institution correctly concludes that student loan debt has reached “crisis levels."1 Using

college entrants from 1995-96 and 2003-04 as guides, the report found that “nearly 40% [of borrowers]

may default on their student loans by 2023.”

This is the logical outcome of a trend that has been skyrocketing upward for 35 years. In 2004, student

loan debt held by Americans totaled $345 billion.2 That number has jumped to $1.6 trillion in 20193 – a

464 percent jolt higher in nominal terms. Student loans constitute the second-highest household debt

after housing, and it’s the only form of consumer debt that has gone up precipitously post-Recession.4

And borrowers aren’t graduating with small amounts owed, either. In fact, the average borrower today

owes nearly $40,000 after they graduate. A quick look at the data reveals the stark consequences of this

massive rise: slowing small business startups5, more loan defaults6, and declining home ownership rates.7

An honest look at the data plainly reveals that “student debt isn’t skyrocketing because college is too

expensive. Higher education is too expensive because federal student loans and grants are so plentiful.”8

Our 2018 Restoring Higher Education in AmericaRestoring Higher Education in AmericaRestoring Higher Education in AmericaRestoring Higher Education in America9 paper delves deep into the root causes of the cost

crisis in higher education and explains why and how.

Since government is the driving force behind the crisis in higher education and student loans in the first

place, we shouldn’t turn to it for the kind of massive “student loan forgiveness” scheme put forward by

the likes of Democratic presidential candidates Bernie Sanders and Elizabeth Warren. That’s because

“more third-party spending via such an expansive government program would only serve to exacerbate,

not alleviate, the rising tide that is college costs. And the truth is, Millennials will eventually have to pick

up the tab through payments on a federal debt that is already nearly [$24] trillion.”10

Although their ideas might be appealing on the surface, the reality is that they are impractical to execute,

impossible to afford, and politically untenable. Even so, there is justification for some government-

sponsored relief to help address the student loan burden felt by tens of millions of Americans. But this

relief should be geared toward market-based solutions.

In Restoring Higher Education in America, I proposed a series of reforms to the higher education and

student loan systems to bring down the cost of college. I also explored the important idea of restoring

bankruptcy protection for deeply-indebted borrowers, as it is almost impossible to do under current law.

But most people certainly don’t want to declare bankruptcy if they can afford it. So even if we restored

bankruptcy protection, that wouldn’t do anything to help everybody else who still holds student debt.

Enter the Employer Participation in Repayment Act and the Student Loan Repayment Acceleration Act. These bills are intended to engage employers in helping their workers pay back their student loan debt

more quickly as a tax-free benefit offered by their employers. Although this is no silver bullet, the idea

of involving employers in student loan repayment on a tax-free basis makes sense. It leverages something

employers are already doing and want to do more of – and it’s an affordable and feasible approach.

EXECUTIVE SUMMARYEXECUTIVE SUMMARYEXECUTIVE SUMMARYEXECUTIVE SUMMARY

Easing the Burden Easing the Burden Easing the Burden Easing the Burden of Student Loan Repaymentof Student Loan Repaymentof Student Loan Repaymentof Student Loan Repayment

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The idea of employers offering their employees support in repaying student loans as a company benefit

is nothing new. In fact, a number of major corporations already offer this kind of assistance, including

Aetna, Hulu, Penguin Random House, Fidelity Investments, and PricewaterhouseCoopers.11

The way most employers do it, assistance is provided as “a matching contribution or a flat contribution

regardless of how much the employee is paying each month…Depending on the company, there may be

a limit on how much repayment assistance an employee receives each month, each year or in total. Some

employers, however, don’t have a lifetime cap, which provides an incentive for top talent to stick around

for the long term.”12

Attracting and Attracting and Attracting and Attracting and Retaining Retaining Retaining Retaining EmployeesEmployeesEmployeesEmployees The American economy is unquestionably at one of its high points. With unemployment continuing to

stay at parity with 1969’s record lows and wages finally rising, the job market is as strong as ever. In fact,

in its December 17, 2019 JOLTS report, the Bureau of Labor Statistics reports that the number of job

openings “has exceeded the number of unemployed persons for 20 consecutive months.”13 That this

trend is continuing is remarkable – and it means that employers are constantly competing with one

another to recruit and keep top-notch talent. But with no generation is this need to compete for talent

more apparent than with Millennials.

The Millennial Generation is now the largest generation in the workforce, and one of the challenges

employers face today lies in attracting new Millennial employees and retaining existing workers. In fact,

a recent study conducted by Gallup concludes that “job-hoppers” is a fair description for the generation.

The report finds:14

Twenty-one percent of Millennials say they’ve switched jobs within the past year – “more than

three times the number of non-millennials who report the same.”

While 60 percent of non-Millennials plan to be working for their current employer a year from

now, only half of Millennials feel the same way.

Sixty percent of Millennials say they’re open to a different job opportunity, versus 45 percent of

non-Millennials.

Among Millennials, 36 percent say that, with an improving job market, they’ll be looking for a

new job in the next 12 months; among non-Millennials, that number is 21 percent.

Turnover among Millennial workers costs the overall U.S. economy $30.5 billion each year.

A paycheck isn’t the only reason Millennials are so ready to seek out new employment. And while Gallup

identifies several different motivations that differ from other generations, it’s clear that employers need

to be creative with the opportunities and benefits they’re offering Millennials – and student loan aid is

one of those key benefits they’re looking for.

One 2019 survey of job seekers who graduated from college within the past 24 months or will graduate

in the next 12 found that student loan repayment was third in line for preferred benefits.15 Ahead of it

SECTION ONESECTION ONESECTION ONESECTION ONE

EngagingEngagingEngagingEngaging EmplEmplEmplEmployers oyers oyers oyers inininin Student Loan Student Loan Student Loan Student Loan RepaymentRepaymentRepaymentRepayment

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were health insurance and paid time off – but respondents ranked a 401(k) in fifth place. “Tellingly,

respondents with college debt most wanted any new benefit dollars from their employer to go toward

helping them repay their loans.”16 Moreover, according to a 2017 American Student Assistance survey,

“86 percent of young workers with student loans said that they would commit to their employer for five

years if it helped pay off their debt.”17

A survey of working professionals conducted by student loan refinance lender SoFi – which

coincidentally offers its employees repayment help – reached similar conclusions.18 They found that a

whopping 95 percent of professionals under 30 who have student debt “would be more willing to accept

a job if it offered student loan repayment.” Also, among those respondents who have student debt, 71

percent said that “such a benefit would be the most or second-most meaningful benefit they could receive

from an employer” and 70 percent “say that their student loan burden forces them to contribute less than

they would like to their retirement plans.”19

Realistically, those with significant student debt burdens aren’t capable of building up their nest egg

because of the percentage of their income that must be devoted to student debt. However, if borrowers

are able to pay down their debt more quickly, they’ll be far more equipped to start making meaningful

retirement contributions.

The ChaThe ChaThe ChaThe Challenge of Student Lollenge of Student Lollenge of Student Lollenge of Student Loan Repayment Asan Repayment Asan Repayment Asan Repayment Assistancesistancesistancesistance The time is ripe for a surge in the number of employers offering student loan support payments as a

benefit. That’s because startup firms like Student Loan Genius, Tuition.io, Gradifi, and FutureFuel.io

are making it easier to set up these kinds of benefits.20 The opportunities are ever-expanding, to the point

where traditional financial companies like Fidelity Investments are getting in on the action.21

When it comes to offering help with student loan repayment, small businesses struggle to compete with

those larger companies that have wider bandwidth to offer this kind of benefit. The Society for Human

Resource Management found that, in 2019, only about 8 percent of employers offered such a benefit.22

While that number is double that of 2018 – underscoring how valuable businesses are finding student

loan support benefits to be – it is still shy of even a tenth of all employers.

One possible explanation for this number is the difficulty smaller companies have with stepping it up

given that they have financial resource constraints that are comparatively greater than big businesses.

That’s in part because, under current law, employers and employees both have to pay taxes on the aid.

This eats away at its value, especially as a recruitment tool.

But what if employers were able to help their employees pay back student loan debt more quickly and

more easily – with no taxes due for either party? Such a plan would undoubtedly provide a great incentive

for more companies – and especially smaller enterprises – to take on such benefits. Given that many

young professionals view this kind of benefit as being on par with a tax-free retirement plan – and make

an apples-to-apples financial comparison between the two – this conclusion makes all the more sense.

To that end, there are two notable proposals currently before Congress that would enable employer-

provided student loan repayment assistance to be offered on a tax-free basis. These are the Employer Participation in Repayment Act and the Student Loan Repayment Acceleration Act.

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For many years, Section 127 of the Internal Revenue Code has provided employers with the opportunity

to give tax-free tuition assistance to current employees while they are in school. Sec. 127 enables an

employer to offer up to $5,250 each year in employee compensation that is expressly intended to help

pay their higher education bills. Current law allows this benefit to be excluded from taxation and applied

toward any undergraduate, graduate, or certificate level program.

In an age of high tuition bills that just keep rising, this popular benefit helps make it easier for students

to go to school without having to take as many student loans as they otherwise would – or none at all. It

is also true that many young people will forgo a college education altogether due to cost, and this benefit

– offered by an employer, not as a government entitlement – may make it something they can afford.

While this tax-free benefit is provided to employees who are in school, such an opportunity is not

afforded to workers who’ve already graduated and have student loan debt. The Employer Participation in Repayment Act (EPRA)23 would expand Sec. 127 to include student loan payments as well.

Benefits of Benefits of Benefits of Benefits of Expanding Sec. 127 Expanding Sec. 127 Expanding Sec. 127 Expanding Sec. 127 through EPRAthrough EPRAthrough EPRAthrough EPRA The Employer Participation in Repayment Act is currently working its way through Congress. The bill

was introduced by Congressmen Rodney Davis (IL-13) and Scott Peters (CA-52) as H.R.795 in the U.S.

House and by Senators John Thune (SD) and Mark Warner (VA) as S.460 in the U.S. Senate. EPRA is

distinctly bipartisan – Davis and Thune are Republicans and Peters and Warner are Democrats – and it

currently has 221 cosponsors in the House – more than enough to push it over the finish line. There are

four key reasons why EPRA offers a pathway worthy of consideration and support.

ConsistencyConsistencyConsistencyConsistency The evidence is abundantly clear: Student loan debt holds back economic growth and individual potential

and prosperity. In a recent study on how Millennials work and live, Gallup found, “A third or more have

delayed purchasing a house or a car because of their debt, and nearly one in five have put off starting

their own business. [This figure] rises significantly among those with a debt burden of $25,001 or higher

from their undergraduate education.24

Whether a worker is currently working toward a postsecondary or advanced degree, or that worker has

already obtained a degree and is working to pay off that debt, the economic reality is the same. The only

difference is if a worker is accruing the debt now or if they’ve already incurred it. Either way, there are

costs involved. For consistency alone, there is no reason to limit this benefit to current students but not

to student loan debtors.

The Value of The Value of The Value of The Value of Employees Without Employees Without Employees Without Employees Without StuStuStuStudent dent dent dent DebtDebtDebtDebt Gallup notes that “nearly half of recent graduates who incurred any amount of student loan debt have

postponed further training or postgraduate education because of their student loans.”25 And as with

delays in home or automobile purchases and business startups, the percentage of student loan debtors

holding off on more education “rises significantly among those with a debt burden of $25,001 or

SECTION TWOSECTION TWOSECTION TWOSECTION TWO

Employer Employer Employer Employer Participation in RParticipation in RParticipation in RParticipation in Repayment Actepayment Actepayment Actepayment Act

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higher.”26 An employee who has student loan debt will see obvious financial advantage from an

employer’s participation in repaying that debt. It will speed up the time it takes for the employee to pay

off the liability – making it more likely that they’ll be able to continue their education by pursuing an

advanced degree, purchase a new home, or start a family, and sooner than later.

But a worker’s ability to continue education, pursue more training, buy a home, or start a family also

benefits the employer in two key ways. First, less financial stress means a more satisfied and happier

worker. This will boost staff morale and in turn promote greater productivity gains. Just as importantly,

if not more so, benefits like tuition reimbursement or student loan payment support engender “a sense

of loyalty between the employee and the employer; since the employer is invested in the employee's

development and success, the employee feels more invested in the company's success. This means

employees stick around longer, reducing turnover and saving [the] company the costs of finding and

training new hires.”27

Second, employees who are able to obtain more training in their field will bring more skills to the table,

feel more satisfied with their jobs, and increase productivity even more. Improving skills and honing

those skills are critical to bettering performance, which is why many professions (such as lawyers and

educators) require their professionals to obtain continuing education credits. This value underscores

why employers offer tuition support to their employees. Precisely the same value is provided in a loan

repayment context: If a worker won’t pursue further education because an existing debt is holding them

back, and it’s clear that more education will help the firm, then the logical thing to do is help that

employee pay back their loans so they will be willing to continue with their schooling.

No Need to Reinvent the WheNo Need to Reinvent the WheNo Need to Reinvent the WheNo Need to Reinvent the Wheelelelel The beauty of EPRA is in its simple structure. That is, the legislation proposes to expand what is already

in place – the $5,250 tax-free tuition support already permitted to employers under IRS Sec. 127 – and

to allow student loan debt to fall under that same classification. Thus, the bill – which is just over two

pages long – isn’t confusing or difficult to implement. There is no need to reinvent the wheel when you

already have a preexisting structure in place.

Fiscal SenFiscal SenFiscal SenFiscal Sensibilitysibilitysibilitysibility and Personal Responsiand Personal Responsiand Personal Responsiand Personal Responsibilitybilitybilitybility Two of the main reasons Americans across the political spectrum oppose blanket student loan

forgiveness are fiscal responsibility and personal responsibility. Because there is $1.6 trillion outstanding

in student loan debt today, most people are rightly concerned about the cost of cancelling all, most, or

even half of that debt along the lines of the Sanders and Warren proposals. There is simply no way to

afford such a large sum, and even if something like the Warren wealth tax could work (and it can’t), such

an idea will never pass political muster and get through Congress. Many are also concerned that “wiping

the slate clean” will chip away at the fundamental American ideal of individual responsibility. That’s

because it sends a message to future student loan borrowers as well as existing debtors that they don’t

have to be accountable for their own financial decisions; instead, somebody else will pay for it.

EPRA doesn’t run into these same issues. First, by letting employers help repay student debt up to $5,250

annually on a tax-free basis, revenue to the federal government may decline. (It appears the

Congressional Budget Office has yet to score the bill and offer a fiscal note, so we don’t know what the

projected revenue loss might be.) However, even if that is the case, unlike widescale debt cancellation,

the total amount of student debt won’t be paid off overnight, not every employer can or will offer the full

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benefit, and it will take time for more employers to adopt it. Workers who receive this benefit may well

strive to pay down more from after-tax income as well – meaning that an individual’s balance will decline

overtime, as intended, without a massive federal outlay. And less money coming to the government in

the form of a lower tax burden is more pro-growth than federal spending directed by Congress would

be. Consequently, this approach is much more viable from a fiscal standpoint.

Second, personal responsibility remains intact. Borrowers who took out the loans will still be required

to pay them back, and in order to receive the employer benefit they will have to work for an employer.

Therefore, the responsibility element remains, and businesses are simply contributing to their employees

and both are benefiting without the interference of government taxation. (This also amplifies the fiscal

sensibility of the EPRA approach: As an employee works and receives the benefit, they are simultaneously

helping to produce economic gains that lead to offsetting a potential revenue drop to the government.)

Another unique way of engaging employers in student loan repayment has been proposed in Congress.

In October 2018, Senator Cory Gardner (CO) introduced the Student Loan Repayment Acceleration Act (SLRAA).28 This bill would help make it easier for student debt borrowers to pay back their loans more

quickly by similarly encouraging employers to provide more assistance to their workers. Gardner’s

proposal offers a different structure from EPRA that in some ways provides greater flexibility.

ThThThThe e e e SLRAA SLRAA SLRAA SLRAA StructureStructureStructureStructure Whereas EPRA would expand the existing Sec. 127 employer tuition assistance tax exemption, SLRAA proposes to allow employers to voluntarily set up 401(k)-style accounts for student loan debt repayment.

Whereas EPRA caps the benefit at $5,250, employers and employees would be able to jointly contribute

up to $10,000 annually to these accounts. These contributions would be exempt from income, payroll,

and federal unemployment tax unless and until they hit the $10,000 limit. Also, unlike EPRA, employers

would have the freedom to determine how they want to structure their contributions and those of their

employees. For example, an employer could “match” an employee’s contribution, or the employer could

simply make monthly payments. It’s up to the firm.

Finally, whereas ERPA only applies to an employer-employee relationship, SLRAA includes a provision

for sole-proprietors and the self-employed. These individuals would be allowed to claim student loan

debt as an above-the-line deduction limited to $10,000 per year. It forbids employees, self-employed

individuals, and sole-proprietors from claiming double benefits via the student loan interest deduction.

Benefits of a 40Benefits of a 40Benefits of a 40Benefits of a 401(k)1(k)1(k)1(k)----SSSStyle tyle tyle tyle ApproachApproachApproachApproach SLRAA has many of the same positives as EPRA, but with a few notable differences.

Consistency and ValueConsistency and ValueConsistency and ValueConsistency and Value

As with EPRA, SLRAA offers employers and employees the benefits of consistency and value for both

the employer and the employee. Gardner’s bill would offer some relief to workers and help make student

SECSECSECSECTION THREETION THREETION THREETION THREE

The Student Loan RepaymentThe Student Loan RepaymentThe Student Loan RepaymentThe Student Loan Repayment Acceleration ActAcceleration ActAcceleration ActAcceleration Act

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loan repayment a normal part of being an employee for those who have student loan debt. Many

employers already offer retirement plans, but for deeply-indebted borrowers making diligent payments

on student loans, it may be premature to allocate limited income for retirement at the same time.

Employers should be able to offer options: tax-exempt retirement account and/or a tax-exempt student

loan account. Moreover, employers are eager for new opportunities to attract new workers beyond

simply offering higher pay. One important benefit that many young people are looking for in an

employer is assistance with student loan debt. An initiative like SLRAA would provide added incentive

for employers to expand these kinds of competitive benefits and thereby continue to help so long as

student loan debt is an issue.

No Need to Reinvent the WheelNo Need to Reinvent the WheelNo Need to Reinvent the WheelNo Need to Reinvent the Wheel Gardner’s proposal does not reinvent the wheel, either. The difference is that, whereas EPRA expands

Sec. 127 of the federal tax code, SLRAA would mimic existing structures, such as 401k plans, and would

be set up more like what many employers already do on the retirement side. It would also take the

existing concept of an above-the-line deduction and enable the self-employed to apply such a deduction

to student loan debt.

What is particularly exciting about the Gardner bill is its flexibility. The legislation would leave it up to

employers how to work out an arrangement with their workers and provide greater personal ownership

in an individual account. The fact that it has an allowance for sole-proprietors is also a net positive,

especially for Millennials who are highly entrepreneurial, growing participants in the “gig economy,” and

always looking for maximum flexibility in arranging their work-life balance.

Fiscal SenFiscal SenFiscal SenFiscal Sensibilitysibilitysibilitysibility and Personal Responsibilityand Personal Responsibilityand Personal Responsibilityand Personal Responsibility Cancelling student loan debt outright would require an exorbitant fiscal cost and turn what is already a

crisis in higher education into a catastrophic nightmare that would ripple throughout the nation’s higher

education system. Even more, it forces others to effectively buy the college student something of value

for nothing in return. The lender (taxpayer) is stiffed, or the borrower steals the loan by favoring the

borrower over the lender. This does not mean that government cannot or should not take certain actions

to help address the student loan crisis, however – which is precisely why SLRAA is a worthwhile proposal

to consider. It doesn’t have untenable fiscal costs, and it leaves personal responsibility intact.

The idea of engaging employers in student loan repayment is catching on, and businesses are increasingly

viewing this kind of benefit as an effective way to recruit and retain employees in very hot and very tight

labor market. It also holds tremendous benefit for workers who have student loan debt and need relief

from its overwhelming burden in order to buy a home, start a family, move on to the next step in their

education, or any number of alternatives. Plus, the nation as a whole would benefit from more

Americans who are full participants in the economy – with greater discretionary income, less stress,

higher productivity, and a greater bandwidth to invest in stocks, bonds, and real estate. Both the

Employer Participation in Repayment Act and the Student Loan Repayment Acceleration Act are great approaches to encouraging employers to actively aid workers with student debt in paying it back.

COMPARISONCOMPARISONCOMPARISONCOMPARISONSSSS ANDANDANDAND COCOCOCONCLUSIONNCLUSIONNCLUSIONNCLUSIONSSSS

Two Two Two Two Reasonable, SensibleReasonable, SensibleReasonable, SensibleReasonable, Sensible andandandand Practical Practical Practical Practical ApproachApproachApproachApproacheseseses

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PotentialPotentialPotentialPotential ConcernsConcernsConcernsConcerns Although both EPRA and SLRAA are viable, market-based proposals, there are two particular concerns

that both bills may elicit that are worth addressing beyond just the argument about potential lost revenue

to the federal government.

First, EPRA expands an existing tax exemption and SLRAA permits a new kind of 401(k)-style account.

They do this rather than reducing rates. Market economics tells us that lower tax rates over a broader

tax base, and with a simpler tax system, promotes greater economic growth and prosperity. The Tax Cuts and Jobs Act helped to simplify the federal tax code slightly, although not extensively so. An

argument could be made that an across-the-bard cut in tax rates would be a better way to enable

borrowers to make loan payments. Indeed, all Americans would get to keep more cash tax-free to spend

as they see fit, and regardless of whether they have student loans or not.

While this may be true and a preferred approach, political reality suggests a simple, widescale rate

reduction is unlikely to happen again anytime soon. Also, employers are already looking for a financial

pathway to provide this kind of benefit, and a tax exemption offers that incentive. Furthermore, by

expanding an existing benefit rather than creating something dramatically new, EPRA doesn’t add to the

complexity of the federal tax code. Similarly, SLRAA is built on the existing frameworks of a 401(k) and

above-the-line deductions and therefore limits tax code complexity as well.

The second argument relates to the underlying stimulants for the higher ed cost crisis. Because existing

federal student loan and grant programs are the primary cost drivers, this argument goes, tax-free

benefits like what EPRA and SLRAA propose would simply worsen the problem by further incentivizing

higher costs because students will feel emboldened to take out loans – with the expectation of eventual

employer assisting with repayment – and colleges and universities will continue to blithely raise prices.

This may be a valid macroeconomic concern, but it is not a strong critique.

Neither bill is dramatically sweeping in that, although many more employers will undoubtedly take it up

and many borrowers will be helped, there are others who may not. Employers may offer student loan

repayment support or a retirement plan and not both; thus, debtors who have a small enough student

loan balances may select to set up a retirement plan if given the choice. Plus, the EPRA tax exemption

requires an employer, and SLRAA needs either an employer or self-employed income to kick in. Neither

is suggesting “free money.” Thus, the incentives to take out more loans or raise tuition are not the same

as with the current system of loans and grants that already drive college costs higher.

Comparing the ProposalComparing the ProposalComparing the ProposalComparing the Proposalssss All things considered, EPRA and SLRAA are both viable, sensible ways to help those with student loan

debt pay it back more quickly. Moreover, most significant counterarguments are refutable and do not

undercut the justification for the legislation. Neither EPRA nor SLRAA reinvents the wheel; although

they differ in structure, both build upon existing provisions in the tax code. They are fiscally sensible,

promote personal responsibility, and offer consistency and value to employers and employees. Each bill

has two strengths compared to the other, however.

It appears that EPRA is in some ways simpler to implement and at this point is more likely to pass both

houses of Congress. Regarding implementation, EPRA provides a straightforward and simple change in

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the law: take the $5,250 tax-exempt tuition benefit in Sec. 127 and apply it to student loan repayment.

That’s it. In addition, EPRA currently has 221 cosponsors in the House and 57 cosponsors in the Senate.

To pass the House, the bill only needs 218 votes; the Senate requires 60 votes to get to cloture. That

means there are enough votes in the House and nearly enough in the Senate. However, the bill will not

be voted on its own: EPRA needs to be tied to a larger piece of legislation (such as the Higher Educational Act Reauthorization), which may take some time.

SLRAA has two strengths of its own. As discussed above, the bill offers greater flexibility to employers.

They can establish an arrangement with their employees (i.e. a match) that is unique to their firm, or in

a way that motivates both to contribute in a particular way. Flexibility is always fantastic in any

government system because it doesn’t lock the participant in a narrow, predetermined box. The other

thing that sets SLRAA apart is the higher annual tax-exempt limit of $10,000 compared with $5,250,

along with its availability for sole-proprietors/self-employed individuals. The higher limit is notable

because it would allow an employer to contribute more on an annual basis, tax-free, or for an employee

to match enough – also tax-free – to make it even more worthwhile. And borrowers shouldn’t be unable

to receive this kind of tax benefit just because they are in business for themselves.

The VerdictThe VerdictThe VerdictThe Verdict No matter how you slice it, both EPRA and SLRAA are great ideas that provide much-needed relief at a

critical time. Both build upon existing tax structures and programs that employers are already offering,

promote both fiscal sensibility and personal responsibility, and leverage market principles and incentives

to accomplish important and worthwhile objectives. Either bill would provide a great opportunity to

help unleash the unlimited potential of every individual.

Even more, policy leaders on this critical issue like Sen. Cory Gardner and Rep. Rodney Davis ought to

be commended for their leadership and for offering genuinely sensible alternatives to the “free college”

proposals we typically hear nowadays. This is especially important to emphasize given the incredible

pressure brought to bear for forgiveness. But their desire to seek a common-sense alternative is

appropriate: As 2017 National Center for Education Statistics data shows, “approximately 46% of all full-

time, first-time undergraduate students were awarded student loans.”29 Meaning a (slim) majority of

undergrad students do not graduate with loan debt in the first place, so assistance is one thing, but blanket

forgiveness is another one entirely.

At this time, it seems EPRA has more legs and the higher likelihood of passage in the short-term.

Therefore, it would be wise to look at an addendum or revision that would expand the same tuition and

student loan benefit to self-employed people, perhaps as an above-the-line deduction like SLRAA

proposes. Either way, the kind of approach these bills take would go a long way to ensure equity and

promote the entrepreneurship that has greatly helped the American economy to be the envy of the world.

Contact tContact tContact tContact the Millennial Policy Centerhe Millennial Policy Centerhe Millennial Policy Centerhe Millennial Policy Center 30303030 To contact the Millennial Policy Center, please reach President and CEO Jimmy Jimmy Jimmy Jimmy SengenbergerSengenbergerSengenbergerSengenberger at 720-

316-1072 (office) or Jimmy@MillennialPolicyCenter.org (email).

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1 Scott-Clayton, Judith. “The looming student loan default crisis is worse than we thought.” The Brookings

Institution. 10 Jan. 2018. https://www.brookings.edu/research/the-looming-student-loan-default-crisis-is-worse-than-

we-thought/. 2 "Student Debt Continues to Rise." Peter G. Peterson Foundation, 18 July 2018,

https://www.pgpf.org/blog/2018/07/the-facts-about-student-debt/. 3 USAFacts. "Student Debt Explained: Breaking Down the $1.6T in Loans." U.S. News & World Report, 1 Nov 2019,

https://www.usnews.com/news/elections/articles/2019-11-01/student-debt-explained-breaking-down-the-16t-in-

loans/. 4 Nicolaci da Costa, Pedro. “America's student debt crisis is 'worse than we thought'." Business Insider. 12 Jan. 2018. 5 Wasik, John F. "For Young Entrepreneurs, College Debts Can Snuff Out Start-Up Hopes." The New York Times, 11 Jan 2017, https://www.nytimes.com/2017/01/11/business/smallbusiness/for-young-entrepreneurs-college-debts-can-

snuff-out-start-up-hopes.html/. 6 Scott-Clayton, Judith. “The looming student loan default crisis is worse than we thought.” The Brookings

Institution. 10 Jan. 2018. https://www.brookings.edu/research/the-looming-student-loan-default-crisis-is-worse-than-

we-thought/. 7 Carnevale, Robert. "The Fed Reveals a Direct Link Between Student Loan Debt and a Decline in Homeownership."

ValuePenguin, 7 Feb 2019, https://www.valuepenguin.com/news/student-loan-debt-home-ownership-link/. 8 Sengenberger, Jimmy. "Opinion: Democrats will avoid the real causes of the student loan crisis at Wednesday’s

debate." MarketWatch. 20 Nov 2019. https://www.marketwatch.com/story/democrats-will-avoid-the-real-causes-of-

the-student-loan-crisis-at-wednesdays-debate-2019-11-19/. 9 Sengenberger, Jimmy. “Restoring Higher Education in America.” Millennial Policy Center. 15 Jan. 2018.

https://millennialpolicycenter.org/wp-

content/uploads/2019/03/MPC_PolicyPaper_Restoring_Higher_Education_in_America_Rev_Jan2018.pdf/. 10 ibid. 11 Luthi, Ben. "Which Employers Offer Student Loan Repayment?" 1 July 2019. https://loans.usnews.com/which-

employers-offer-student-loan-repayment/. 12 ibid. 13 "Job Openings and Labor Turnover Survey Highlights, October 2019." Bureau of Labor Statistics. 17 Dec 2019.

https://www.bls.gov/web/jolts/jlt_labstatgraphs.pdf/. 14 "How Millennials Want to Work and Live." Gallup. 2016. https://www.gallup.com/workplace/238073/millennials-

work-live.aspx/. 15 Miller, Stephen. "Younger Workers Put Student Loan Aid Near Top of Desired Benefits." SHRM. 5 June 2019.

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/younger-workers-seek-student-loan-aid-and-

career-development.aspx/. 16 ibid. 17 Januta, Andrea. "Employers help pay student loans to attract workers." Reuters. 5 June 2018.

https://www.reuters.com/article/us-world-work-studentloans/employers-help-pay-student-loans-to-attract-workers-

idUSKCN1J1158/. 18 "The Impact of Student Loan Benefits." SoFi. 2016. https://www.sofi.com/benefits-whitepaper/. 19 ibid. 20 Januta, Andrea. "Employers help pay student loans to attract workers." Reuters. 5 June 2018.

https://www.reuters.com/article/us-world-work-studentloans/employers-help-pay-student-loans-to-attract-workers-

idUSKCN1J1158/. 21 ibid. 22 Skidmore Sell, Sarah. "More employers offer workers help paying off student loans." Associated Press. 29 Oct 2019.

https://apnews.com/f7777c313ce649fe826acb4847093b57/. 23 “H.R.1043 – Employer Participation in Repayment Act of 2019.” U.S. House of Representatives, 116th Congress

(2019-2020), https://www.congress.gov/116/bills/hr1043/BILLS-116hr1043ih.pdf/. 24 "How Millennials Want to Work and Live." Gallup. 2016. https://www.gallup.com/workplace/238073/millennials-

work-live.aspx/.

ENDNOTESENDNOTESENDNOTESENDNOTES

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25 ibid. 26 ibid. 27 Gold, Ori. "How Does Tuition Reimbursement Benefit the Employer?" Study.com.

https://study.com/academy/popular/how-does-tuition-reimbursement-benefit-the-employer.html/. 28 “S. 3595 – Student Loan Repayment Acceleration Act.” U.S. Senate, 115th Congress (2017-2018),

https://www.congress.gov/115/bills/s3595/BILLS-115s3595is.pdf/. 29 USAFacts. "Student Debt Explained: Breaking Down the $1.6T in Loans." U.S. News & World Report, 1 Nov 2019,

https://www.usnews.com/news/elections/articles/2019-11-01/student-debt-explained-breaking-down-the-16t-in-

loans/. 30 The Millennial Policy CenterMillennial Policy CenterMillennial Policy CenterMillennial Policy Center is a policy research, development, and education program (a think tank) whose

mission is to address public policy issues that affect the Millennial Generation (born between and including the years

1981 to 1998) and to develop and present policy solutions that advance the constitutional values of freedom,

opportunity, and economic vitality for Millennials throughout the United States. Our website is

www.MillennialPolicyCenter.org.

WWW.MILLENNIALPOLICYCENTER.ORG