State lawmakers pitched a new tax exemption Tuesday that they say could address both the crushing levels of student loan debt carried by many residents and the perennial concerns that businesses have around being able to find and keep the types of workers they are looking for.
Rep. Kate Lipper-Garabedian told the Joint Committee on Revenue that her bill (H 2985) “would establish a tax exemption for Massachusetts employers that assist their employees with paying off student loan debt” with the annual exemption capped at $2,000 per employee.
The Melrose Democrat said she sent the committee extensive written testimony detailing “the often crippling effect of student debt on an individual’s financial wellbeing, recognizing that debt has a disproportionate impact on individuals in economically vulnerable populations, including people of color, veterans and female heads of household.”
As of 2020, there were 871,600 student loan borrowers who owed roughly $36 billion in debt, the Student Borrower Protection Center said.
According to the latest report from the Institute for College Access & Success, 56 percent of the class of 2020 at Massachusetts colleges and universities had student loan debt, about in line with the national average. But Massachusetts graduates with debt had an average loan balance of $33,457, the eighth-highest average debt amount in the country for the class of 2020.
“Student loan debt has become increasingly pervasive in the commonwealth, crippling our state’s young people, stifling their aspirations and financial outlook, and amounting to nothing short of a crisis. It is in my view this crisis that demands urgent legislative action and calls for creative solutions,” Sen. Edward Kennedy, who filed the Senate companion bill (S 1891), said Tuesday. “Creating an incentive in the form of a tax deduction for private employers to step up and participate in such a solution would represent a viable step towards providing overdue relief to people suffering under the burden of seemingly insurmountable student debt.”
He said the legislation would come at a “relatively modest cost” to the state, with the Department of Revenue estimating the tax policy change would cost between an estimated $1.8 million and $6.7 million.
“But [it] would have a resounding impact on our economy and on the futures of college graduates,” Kennedy added.
Kennedy said that Massachusetts companies “have been slow to adopt student loan repayment programs” on their own and that the legislation he and Rep. Lipper-Garabedian filed “would lift the financial hesitation associated with initiating repayment.” He said the bill would not only help recent graduates but also mid-career professionals who are still chipping away at their student loan debt payments.
“If student loan repayment becomes a widely offered employee benefit, it would encourage debt-saddled jobseekers to pursue career options that are better suited to their interests and skills and in areas of our economy where there is a need for renewed talent,” he told the Revenue Committee. “It would enable them to contribute to our economy more fully, rather than diverting every spare dollar towards loan payments, and allow them to solidify their financial futures by buying homes and contributing to retirement accounts.”
Lipper-Garabedian, a former public school teacher who more recently served as the chief legal counsel at the Executive Office of Education, said she believes her bill would also help the businesses that agree to help pay their workers’ student loans by helping them attract and retain talent.
“A tool like an employer student loan repayment program not only assists graduates with the challenge of college debt, it also supports our employers in recruitment and retention efforts, promising additional benefit to the commonwealth economy,” she said.
The head of the Association of Independent Colleges and Universities in Massachusetts, the state’s leading lobbying group for private colleges and universities, said his organization views the Lipper-Garabedian/Kennedy legislation “as a continuation of the collective efforts to provide additional tools and resources to help Massachusetts families plan for college education.”
“The bill would incentivize more employers to provide a benefit to employees in the form of a tax-exempt employer student loan repayment, while providing those same employers with a tool to encourage their employees, in whom they have invested resources to train, to stay and grow here in the commonwealth,” AICUM President Rob McCarron said. “A few large companies in Massachusetts have already launched this student loan repayment program and they’re seeing great success. Those companies include Fidelity and PwC.”
Rep. Steven Owens on Tuesday advocated in favor of legislation he filed (H 3030) to bring the Massachusetts tax code into line with changes made under the American Rescue Plan Act that made forgiven student loan debt exempt from counting as income for the purposes of federal taxes.
“Just to be clear, this bill doesn’t actually forgive any additional student loans or fees. It just makes sure if a borrower’s loan is discharged through existing or future programs, that they are not penalized with a large lump-sum tax bill for the amount forgiven,” Owens said.
At the same time that the Revenue Committee was hearing testimony on employer student loan repayment, the Public Service Committee heard support for proposals to allow state government to cover the student loan payments for anyone serving in law enforcement.
Student loan debt is a frequent issue on Beacon Hill. A law that took effect July 1 enshrined a “student loan borrower bill of rights” in Massachusetts, including the creation of a student loan ombudsman within the attorney general’s office to field and help resolve borrowers’ complaints. Aside from the ombudsman, the student loan bill of rights language — which passed as part of an economic development law Gov. Charlie Baker signed last January — called for the state’s Division of Banks to license student-loan servicers.
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