State lawmakers on Tuesday proposed a new tax exemption that they said could address both the overwhelming levels of student debt borne by many residents and the continued concerns of businesses about the possibility of finding and keeping the types of workers they are looking for.
Representative Kate Lipper-Garabedian told the Joint Committee on Income that her bill (H 2985) “would establish a tax exemption for Massachusetts employers who help their employees pay off student loan debt” with the annual exemption capped at $ 2,000 per employee.
The Melrose Democrat said she sent the committee detailed written testimony detailing “the often crippling effect of student debt on an individual’s financial well-being, acknowledging that debt has a disproportionate impact on people in populations. economically vulnerable, including people of color, veterans and women household leaders. “
In 2020, there were 871,600 student loan borrowers who owed an estimated $ 36 billion in debt, the Student Borrower Protection Center said.
According to the latest report from the Institute for College Access & Success, 56% of the class of 2020 at Massachusetts colleges and universities had student loan debt, roughly in line with the national average. But Massachusetts graduates in 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 the youth of our state, choking their financial aspirations and prospects, and amounting to nothing short of a crisis. In my opinion, it is this crisis that demands urgent legislative action and calls for creative solutions, ”said Senator Edward Kennedy on Tuesday, who introduced the accompanying Senate bill (S 1891). “Creating an incentive in the form of a tax deduction for private employers to commit to and participate in such a solution would represent a viable step towards providing overdue relief to those suffering from the burden of student debt. seemingly insurmountable. “
He said the legislation would have a “relatively modest cost” to the state, with the Revenue Department estimating the change in tax policy would cost between $ 1.8 million and $ 6.7 million.
“Corn [it] would have a resounding impact on our economy and on the future of college graduates, ”Kennedy added.
Kennedy said companies in Massachusetts “have been slow to adopt student loan repayment programs” on their own and that the legislation he and Representative Lipper-Garabedian filed “would remove the financial reluctance associated with the loan. ‘reimbursement commitment’. He said the bill would help not only recent graduates but also mid-career professionals who continue to lower their student debt payments.
“If student loan repayment became a widely available benefit to employees, it would encourage job seekers in debt to pursue career options better suited to their interests and skills and in areas of our economy where there is a need for talent renewal, ”he said. the income commission. “This would allow them to contribute more fully to our economy, rather than diverting every available dollar toward loan payments, and enable them to solidify their financial futures by buying homes and contributing to retirement accounts.”
Lipper-Garabedian, a former public school teacher who most recently served as chief legal counsel in the Executive Office of Education, said she believed her bill would also help businesses that agree to d ” help pay off student loans for their workers by helping them attract and retain talent.
“A tool like an Employer Student Loan Repayment Program not only helps graduates meet the challenge of college debt, it also supports our employers in recruitment and retention efforts, promising additional benefits to the economy.” of the Commonwealth, ”she said.
The head of the Massachusetts Association of Independent Colleges and Universities, the state’s leading lobby group for private colleges and universities, said his organization saw the Lipper-Garabedian / Kennedy legislation “as a continuation of collective efforts aimed at providing additional tools and resources to help Massachusetts families plan for college.
“The bill would encourage more employers to offer a benefit to employees in the form of a tax-exempt student loan repayment, while giving those same employers a tool to encourage their employees, in whom they have invested.” resources to train, to stay. and grow up here in the Commonwealth, ”said AICUM President Rob McCarron. “A few large companies in Massachusetts have already started this student loan repayment program and are having great success. These companies include Fidelity and PwC.
Representative Steven Owens on Tuesday advocated for legislation he tabled (H 3030) to bring the Massachusetts tax code in line with changes made under the American Rescue Plan Act that exempted student loan debt removed from recognition as revenue for federal government purposes. taxes.
“Just to be clear, this bill does not waive any student loans or additional fees. It just ensures that if a borrower’s loan is repaid through existing or future programs, they will not be penalized with a large lump sum tax bill for the amount forgiven, ”Owens said.
As the Revenue Commission listened to testimony on employer student loan repayment, the Civil Service Commission heard support for proposals to allow the state government to cover student loan payments for any person serving in law enforcement.
Student debt is a common problem in Beacon Hill. A law that came into effect on July 1 enshrined a “student loan borrower’s bill of rights” in Massachusetts, including the creation of a student loan ombudsperson within the attorney general’s office to process and assist with resolve borrower complaints. Aside from the ombudsman, the wording of the student loan bill of rights – which was passed as part of an economic development law signed by Governor Charlie Baker last January – called on the Banking Division to the state to authorize student loan services.