Many decades ago, I was fortunate to work for an employer who provided tuition assistance for my graduate studies. Under Section 127 of the Internal Revenue Service Code, up to $5,250 of that amount was not taxed. That additional support was helpful in my continued education, as it covered most of my annual tuition. It was reassuring to know that I could continue my education while paying my student loans.
Many others, just like me, have benefited since the exclusion was passed in 1978.
In 2020, the Section 127 exclusion remains, providing up to $5,250 of untaxable aid to collegians. Unfortunately, prices have increased since 1978 to where the equivalent increase in the consumer price index would result in an exclusion of about $21,600. U.S. House Bill 4849, co-sponsored by Rep. Danny K. Davis (D-Il.) and Rep. Jason Smith (R-Mo.), would more than double the tax-free amount allowed by statute to $11,500. This bipartisan legislation is supportive of students and will reduce the need for student loans. Loans undertaken by parents in support of their children’s college education would not be included.
In addition, a new piece of legislation is proposing to expand the use of employer-provided educational assistance. The current statute limits use to tuition only for current employees working toward a college degree. The updated version would also permit student loan repayment assistance. Under the proposed legislation, an employer could provide a tax-free benefit to pay more than $30,000 in student debt over three years, effectively and quickly eliminating student debt for the vast majority of graduates.
More than 200 legislators in the U.S. House of Representatives have attached their names to House Resolution 1043, bipartisan legislation introduced by Rep. Scott Peters (D-Calif.) and Rep. Davis. They have been joined in the U.S. Senate with bipartisan legislation sponsored by Sen. Mark Warner (D-Va.) and Sen. John Thune (R-S.D.). With 45 co-sponsors, Senate Bill 460 also has strong bipartisan support.
The Coalition to Preserve Employer Provided Education Assistance, comprised of business, education and labor groups, believes these pieces of legislation would be “an important tool for addressing tuition costs and student debt, furthering higher education, allowing employers to attract the best employees, and building an educated workforce to continue to position the U.S. economy to compete globally.”
While employers would not be required to do so, they could choose to provide a combination of tuition and debt relief assistance to employees. Enhanced employer-provided educational assistance — especially if it is expanded to include repayment of student loans — is a solid way to offer support for every employee who seeks to continue their undergraduate or graduate degrees.
After all, our future nurses, teachers, community leaders, business colleagues and more are looking forward toward a brighter future. Support of bipartisan, proactive legislation will do just that for everyone.
Thomas J. Botzman is president of Misericordia University in Dallas, Pa., the oldest four-year institution of higher education in Luzerne County.