The Post Star
June 12, 2016
Stefanik wants 401K-style program for student loan debt
Retirement dreams are unrealistic when facing the nightmare of paying off college debt, suggested U.S. Rep. Elise Stefanik, R-Willsboro.
“One of the top issues facing our young people today is the student loan debt,” she said in a telephone interview on Friday. “And that’s going to have a long-term impact because people are saving later for retirement. They are saving later to start businesses and to start families because they are saddled with student loan debt.”
Stefanik introduced legislation to establish a 401K-style process for employers to make student loan principal and interest payments on behalf their employees.
The employer could contribute up to $10,000 annually for loan reduction, and the employee would be exempt from federal income tax on the employer payment amount, under the legislation — HR 5415 — that Stefanik and Rep. Luke Messer, R-Ind., introduced Thursday.
Employers could use the benefit as a recruitment incentive to attract high-skilled recent college graduates, Stefanik said.
“I’ve talked to manufacturers in our district and employers in our district about this, and they have been intrigued and supportive,” she said.
Stefanik is running for re-election in November against Democrat Mike Derrick, a retired Army colonel from Peru, in Clinton County, and Green Party candidate Matt Funiciello, a bread company owner and political activist from Hudson Falls.
Funiciello said Stefanik has good intentions, but the legislation is insufficient to deal with the student loan crisis.
“As a component of a broader solution, it might have merit. But as a stand-alone (bill), it doesn’t address need we have locally in this district,” Derrick agreed.
“There’s some very significant and real steps we could take to reform the entire system and support our future, such as regulating interest rates,” Derrick said.
“Right now much of our school debt has an artificially high interest rate that is way above market rates. We could put in place some serious, consequential legislation which would address that issue,” he said.
Funiciello said the Green Party has proposed a one-time federal government payoff of everyone’s student debt, similar to previous bailouts of the financial industry.
Going forward, a portion of the military budget would be redirected to education assistance.
“A debt jubilee for students is what we’re working on, and we don’t want to accept anything less,” he said.
A ‘jubilee’ is an Old Testament term referring to forbearance of all debt once every 50 years.
Stefanik said executives of an accounting firm suggested the tax-free student loan benefit concept at a House Republican Policy Committee Millennial Task Force hearing she chaired in April.
“It’s a voluntary program for businesses to pay up to $10,000 which would be tax free for the young person,” she said.
Clarkson University President Tony Collins praised the concept.
“This legislation is the kind of responsible change needed to have a positive impact on the economy,” he said, in a news release.
The fiscal impact on the federal budget has not yet been estimated.
Stefanik said she has asked the Congressional Budget Office to do an analysis.
“They will have to do an estimate of how many young graduates would utilize this program,” she said.
The federal government would receive less tax revenue than it otherwise would collect if the money was paid to employees as wages instead of loan repayments.