Aug 31, 2021 - Economy & Business

Private sector wants in on America's student debt crisis

Illustration of a large pile of money with a graduation cap on top.
Illustration: Aïda Amer/Axios

Companies are starting to play a role in chipping away at America's mounting pile of student debt.

Why it matters: Widespread student debt relief proposals have stalled in Washington. Businesses are seizing on an opening that benefits them too: a perk that lures workers — and in some cases, a tax break.

Catch up quick: A provision tucked in the initial COVID-19 relief package offers a tax incentive for businesses that contribute to employee student debt payments. It's since been extended through 2025.

  • How it works: Companies can put up to $5,250 toward each employee’s student debt annually on a tax-free basis. (Employees won’t pay taxes on it either.)
  • Tuition assistance up to that amount was tax exempt before the passage of the federal relief package.

Yes, but: “Many of the most vulnerable borrowers — including those who lost jobs during the pandemic — will not receive help from their employers,” says Sarah Sattelmeyer of think tank New America.

  • Implementing a program like this may be too expensive or burdensome for some companies. (That’s if they know about it at all.)
  • Of note: It’s unclear how many companies have taken advantage of the pandemic-era tax incentive. Before COVID-19, about 8% of companies offered student debt repayment — up from 4% in 2018, according to SHRM (the Society for Human Resource Management).

What they’re saying: “Corporations are the beneficiary of the education that students got. So we should be willing to help them reduce [student debt] — or pay it off completely,” Dan Rosensweig, CEO of Chegg, the online education company, tells Axios.

  • Chegg, known for its textbook rental service and other online services for students, started a student debt repayment program in 2019 with $5,000 per year offered to employees at the company for at least 2 years.
  • About $700,000 cumulatively has been paid off for the program's 146 participants.

The backdrop: Employers are playing a bigger role in tackling college costs in an attempt to attract workers — and keep the ones they have from jumping ship.

  • Walmart and Target became the latest to cover tuition costs at select colleges.

What’s next: Pandemic relief for student debt expires next year — following what the Biden administration billed “the final extension” for freezes on federal loan payments and defaulted loan collections.

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