Concerned that mounting student-loan levels are weighing down the state economy, a group representing New Jersey’s CPAs is backing a new federal tax break for companies that help employees pay off their college loans.
The New Jersey Society of Certified Public Accountants announced yesterday that it is urging members to contact the state’s delegation of federal lawmakers to rally support for pending legislation that would grant tax-exempt status to student-loan repayments made by an employer.
The measure is modeled on an existing federal tax benefit for companies that pay tuition for their employees’ ongoing coursework. So far, three members of New Jersey’s congressional delegation — Andy Kim (D-3), Tom Malinowski (D-7), and Frank Pallone (D-6) — have signed on as co-sponsors.
Earlier this year, a survey of New Jersey accountants found student-loan debt was having a major impact on their clients’ ability to do things like save for retirement and buy a home. The NJCPA has also created a task force to look at the student-debt issue more closely.
“At the NJCPA, we believe the (federal) legislation is necessary to relieve some of the burdens faced by today’s workforce, particularly the younger generation,” said Ralph Albert Thomas, the group’s chief executive and executive director.
According to estimates from the New York Federal Reserve, more than 40 million people across the country have taken on a combined $1.6 trillion in student loans, including more than $106 billion borrowed in 2017 alone.
A mountain of debt
The record for single-year borrowing by students was $125.6 billion in 2010, according to the U.S. Chamber of Commerce. Experts attribute the decline to fewer people enrolling in colleges and universities, as tuition costs have gone up.
In New Jersey, more than 1 million people had outstanding student loans totaling more than $43 billion as of the end of last year, according to the nonprofit Student Borrower Protection Center. The average loan balance for each indebted New Jersey resident totaled nearly $40,000, according to the Washington, D.C.-based organization.
State lawmakers have attempted to address student-debt concerns in a number of ways in recent years. A student-loan ombudsman created within the state Department of Banking and Insurance, will help borrowers better understand their rights and responsibilities. That new law also empowers the state to enforce standards on student-loan servicers and to fine violators who give students conflicting, inconsistent or inaccurate information.
The state has also ramped up financial-literacy training that students receive as early as middle school in New Jersey.
Proposals at the federal level
Concerns about student-loan debt have also drawn the attention of federal lawmakers, and as the latest presidential primary contest has taken form, some Democrats have suggested the federal government should help forgive outstanding student loans altogether. Others, including U.S. Sen. Cory Booker (D-NJ), are backing measures that would provide states with federal grants to match their own investments in higher education.
The federal legislation that has the support of the NJCPA would allow employers to claim a tax exemption for up to $5,250 in annual repayments per employee, the same benefit that’s currently permitted for employer tuition reimbursement.
More than 160 members of Congress from both sides of the aisle have signed on as co-sponsors to the “Employer Participation in Repayment Act,” and the bill has also drawn support from groups like the National Association of Independent Colleges and Universities and the National Association of College and University Business Officers.
“This legislation would provide much needed relief for the millions of Americans who carry the often-crippling burden of student debt,” Pallone said in a statement yesterday. “It’s my hope that this bill will help alleviate this burden and encourage companies to provide this benefit to their employees.”
Thomas said the NJCPA’s survey indicated a majority of members believe that student-loan debt has reached “crisis levels” in New Jersey. Among other results, the survey also found that 80 percent of the group’s members said student loan debt was forcing clients to put off buying a home, and 79 percent said such debt was forcing clients to delay saving for retirement.
“We ask our members and their staff to please take the time to contact their representatives . . . to reiterate the benefit that this legislation would provide to all,” he said. “If the House bill collects 290 or more cosponsors, it could go to the House floor for consideration before year-end.”