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Employer-paid student loan repayment help could be coming

Managing student loan debt

With U.S. student loan debt totaling a staggering $1.5 trillion nationally, it's second only to outstanding home mortgage debt for American households. But one idea that could provide some relief for indebted students is now gaining bipartisan support in both the House and Senate.

Under legislation reintroduced in the Senate last week, employers could contribute up to $5,250 tax-free annually to employees' student loan debt repayments. Companies can already get this tax break for employer-paid tuition reimbursements, but the new bill expands the coverage of existing tax codes to include student loan debt repayment.

"That takes an existing legislation and just makes a slight tweak to make it the cover the cost of taking class or covering a student loan," said Mark Kantrowitz, president and vice president of research at Savingforcollege.com. "That might be an elegant way to do this."

Sen. Mark R. Warner, D.-Va., and 18 co-sponsors introduced the Senate bill. Companion House legislation was also reintroduced last week with 100 co-sponsors.

A trillion dollar problem 

It's not the first time that iterations of these bills have appeared on the legislative floor, but they're gaining traction with lawmakers as constituents look for solutions to this financial massive problem.

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For Kaliym Toppin, 28, saving for a big purchase, like a home, is frustrating when he has to put about one-third of his monthly paycheck toward his student loan payments. Toppin, who graduated with about $62,000 in student loan debt, earns about $2,400 per month as an IT support analyst. After student loan payments, rent and groceries, he rarely has anything left to put into savings.

"I wish I had been more knowledgeable," Toppin said.

Similarly, more and more young workers mired in student loan debt are holding off on financial milestones, like saving for retirement, buying homes or getting married. It's also causing a strain on mental health, causing anxiety for Americans over personal finances.

"Paying off student debt is something all of America is going to decide to get aggressive on and go after. It's a huge number. We can only hope to contain it and hope to get it down," said Aaron Pottichen, president of retirement services at Texas-based CLS Partners.

A recruitment and retention tool 

While only 4 percent of companies currently employ the benefit, experts expect that number will climb once the benefit is a tax-advantaged incentive for businesses. For employers, it's a valuable recruitment and retention tool in a low-unemployment economy.

The plan is also cost-efficient. At $50 or $100 per month for lifetime maximum contributions of several thousands of dollars, the bills simply reallocate money that companies would have budgeted for other benefits.

Three generations share 1 big problem: Student debt

Kantrowitz believes the bills will likely pass, given the increasing public frustration about student loans and because they're both bipartisan and bicameral.

"Republicans love tax cuts, and Democrats love making college more affordable," Kantrowitz said. "This fits in the center of their Venn diagram."

They also put the onus of this student loan debt relief on employers, rather than on the federal government, making it an attractive option for each. "The financial contribution from the federal government is just excluding it from taxes," Kantrowitz said.

For employees who are trying to make their monthly payments, however, the benefit shows that their employers both identify with and are in touch with their concerns. Kasee Kinzler, a senior associate at Andersen Tax, found this to be true when she signed up for her company benefit program, administered through Gradifi, back in October.

The $100 monthly employer contribution toward her $700 monthly payment gave the 29-year-old peace of mind. Said Kinzler: "I think every little bit helps."