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Commentary By Beth Akers

New Student Loan Reform Plan Sounds Good, but Would Only Bleed Taxpayers Even Drier

Education Higher Ed

There are solutions out there that both "sound good" and do good. This isn't one of them.

Making employer-provided student loan repayment benefits exempt from federal taxes is the newest scam in student lending. But rather than the borrowers being the victim, this time it's the taxpayers.

There's been growing support behind the idea that when employers help students repay their student loans those benefits should be exempt from taxes, both for the employer and employee. Right now, there are two bills in the House that would create this tax break.

The first, which was introduced by Reps. Rodney Davis, R-Ill., and Scott Peters, D-Calif., even has bipartisan support. The idea, of course, is that this policy change, while creating a cost to taxpayers in terms of lost tax revenue, would benefit borrowers who are struggling to repay their debts. Supporters suppose that borrowers would be helped directly by the deductibility of the benefit but also because employers would be incentivized by their own tax exemption to increase compensation.

This is not at all the case.

Since borrowers wouldn't be paying taxes on the portion of their compensation that was paid as a student loan repayment benefit, the same level of compensation could, at least theoretically, go farther.

But there's a flipside to that coin. This policy also makes it possible for....

Read the entire piece here at the Washington Examiner


Beth Akers is a senior fellow at the Manhattan Institute and coauthor of "Game of Loans: The Rhetoric and Reality of Student Debt."

This piece originally appeared in Washington Examiner