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April 1, 2019 FOCUS: Tax Law

Bill offers CT companies a tax credit for student loan assistance programs

Photo | Contributed Hartford-based Foley adopted a student loan repayment benefit three years ago. Now, 20 percent of the company's employees use it, including: (Front) Diamond Bates, Gary Santiago, Maria Spellman and (back) Alexander Lavruk and Grayson Yacovone.
Photo | Contributed Travelers Cos. has a major presence in downtown Hartford.
Sen. Will Haskell, (D) Westport
House Minority Leader Themis Klarides, (R-Derby)
Michelle Rakebrand, lobbyist, Connecticut Business & Industry Association

Connecticut businesses that offer student loan repayment assistance to employees could be eligible for a new tax credit under a bill being considered by state lawmakers.

There have been a handful of proposals on the topic filed in the legislature this year, and one — Senate Bill 435 — recently passed out of the Higher Education and Employment Advancement Committee. It would create a tax credit starting in Jan. 2020 that would be equal to 50 percent of the monthly student loan payment made by the employer on any eligible loan.

Bill proponents agree there is a chance some kind of employer tax credit will be approved this session as the concept has bipartisan support.

“I'm really optimistic about this,” said state Sen. Will Haskell, a freshman Democrat from Westport. “And I think we can work out a bipartisan agreement.”

House Minority Leader Themis Klarides (R-Derby) said she's heard a lot of concerns about student loan debt, with the average pupil owing about $30,000 after they graduate college.

“By providing this tax credit, we're in a position to provide student loan repayment assistance and help replenish the aging workforce in Connecticut at the same time,” she said.

During his Feb. 20 budget address, Gov. Ned Lamont called for more companies to adopt student loan repayment benefits, arguing it could act as a recruitment tool for the state.

He also pointed to major corporations Travelers Cos. and Stanley Black & Decker as examples of companies preparing to offer such a benefit.

For example, Travelers announced earlier this year that starting in Jan. 2020 it will contribute up to 5 percent of an employee's annual salary, capped at $6,500, to a 401(k) to help repay student loans.

That particular type of benefit may not be eligible for a tax credit under the bill recently passed out of the higher-ed committee because it's not a direct payment to a loan service provider, but it does show companies have been getting the message about the student loan debt crisis. Student loan debt in the U.S. reached more than $1.5 trillion at the end of 2018, three times higher than 2006. And, in Connecticut, the problem is exacerbated by the high cost of living for Millennials.

“We have the most talented workforce in our industry and benefit immeasurably from the education and expertise they bring to their work,” Travelers Chairman and CEO Alan Schnitzer said when the company announced the rollout of its program. “Yet many of our colleagues all too often struggle to save for retirement because student loans weigh so heavily on their finances. Investing in their education shouldn't stop our employees from investing in their future. We are promoting a standard of employee care that enables them to do both.”

Mary Henry, CFO of Hartford-based Foley, which provides compliance, financial and insurance services for the transportation and employment industries and has offered a student loan repayment program for several years, said her business would “absolutely” use the proposed tax credit.

Foley, which has 200 employees, pays $1,000 a year toward an employee's student debt for as long as the person works there. Three years after Foley started its student loan repayment benefit, Henry reports that 20 percent of her workforce has applied for repayments.

“It's one of the most popular employee benefits we offer,” Henry said. “Most of them are younger workers. We were surprised that a lot of our long-term employees have participated. I guess they still had some student loan debt to pay off.”

Connecticut Business & Industry Association (CBIA) lobbyist Michelle Rakebrand said her organization supports the legislation and hopes it would spur more companies to adopt such a benefit. She cited a 2018 CBIA survey that found only about 3 percent of her members offer student loan assistance to their employees.

“There is a federal tax credit for companies that offer tuition help to employees, but not for student loan repayments,” she said. “We are hoping the use of the proposed state tax credit correlates to the tax benefits they receive.”

While Henry is happy with the proposed tax credit, she also hopes that someday such a benefit didn't have to be taxed. “Unfortunately, it is a taxable benefit,” she said. “Maybe, don't tax the benefit. Treat it just like 401(k) and healthcare benefits as pre-tax.”

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