Law360 (June 9, 2020, 5:52 PM EDT) -- Tax incentives and other measures to help young workers with big student loan debts deal with disruptions in employment and financial setbacks could win the favor of lawmakers in both parties negotiating legislation to address the COVID-19 pandemic's economic fallout.
Republican and Democratic lawmakers are looking at ways to assist 44 million borrowers with more than $1.5 trillion in student loan debts. (AP)
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and other Republicans have signaled their opposition to a provision of the House-passed H.R. 6800, the $3 trillion Health and Economic Recovery Omnibus Emergency Solutions Act, for economically distressed student loan borrowers. The measure would provide a $10,000 payment toward reducing the balance of a private student loan, and a similar payment or loan forgiveness for a federal student loan.
"I would guess it's going to be on the agenda," Grassley told Law360. "The only thing that's been suggested is forgiveness. But I don't think you're going to forgive student loans if you don't forgive people's house mortgages."
Grassley has called for measures to deliver more information to potential borrowers before they obtain student loans and has looked to account for their needs when designing coronavirus relief measures. For example, Grassley has pushed for a bipartisan Senate proposal, S. 3841, that would bar the assignment or garnishment of 2020 economic impact payments to pay off debts, similar to a provision of the Heroes Act.
On the other side of the aisle, House Ways and Means Chairman Richard Neal, D-Mass., and other senior Democrats in both chambers have argued that direct payments, or partial loan forgiveness, would provide the most effective assistance to student loan borrowers as they contend with financial losses, work restrictions, furloughs and layoffs.
Sen. Debbie Stabenow, D-Mich., a member of the Finance Committee, said Senate Democrats support student loan payments and loan forgiveness in the Heroes Act, and would be looking to advance tax incentives and other measures to help young workers deal with such debts.
"The burden of student loans is incredibly high. At this time, it is even more of a burden. I think it needs to be recognized," Stabenow told Law360.
Persis Yu, a staff attorney for the National Consumer Law Center, a nonprofit consumer advocacy group, said that House Democrats already had curbed the impact of student loan relief in the Heroes Act by limiting such aid to economically distressed borrowers, including those with delinquent or defaulted loans. She voiced concern that such limited measures "will leave many borrowers without long-term relief."
While some consumer advocates have called for government-backed student loan debt payments and forgiveness, some business advocates have disagreed. Richard Hunt, president and CEO of the Consumer Bankers Association, representing community banks, said in a May 14 letter to House Speaker Nancy Pelosi, D-Calif., and Minority Leader Kevin McCarthy, R-Calif., that government payments would "disrupt consumer loan agreements and repayment plans already helping private student loan borrowers during this time."
In lieu of student loan payments or forgiveness, Sen. Cory Gardner, R-Colo., said he believed Republicans would support tax incentives such as his plan to expand an allowance included in the Coronavirus Aid, Relief and Economic Security Act, enacted in March, to temporarily allow an employer to reimburse an employee for up to $5,250 in 2020 student loan payments. The cap matches the annual cap on employer educational assistance, or tuition reimbursement, in Internal Revenue Code Section 127 .
"It's a good start. We need to do more. We have significant debt burdens out there. People need all the help they can get," Gardner, a former National Republican Senatorial Committee chairman, told Law360.
Gardner has been pushing a Student Loan Repayment Acceleration Act proposal, S. 2347, to lift an annual allowance for employer reimbursement for employee student loan payments capped at $10,000 and excluded from an employee's income and payroll taxes.
Aliya Robinson, vice president of retirement and compensation policy for the ERISA Industry Committee, an alliance of companies with employee retirement and health plans, said her group supported proposals that would extend and expand the one-year allowance for tax-exempt employer reimbursement for student loan payments.
Robinson said the group also supported efforts to broaden and codify an allowance provided by the Internal Revenue Service in a 2018 private letter ruling for drugmaker Abbott Laboratories to make nonelective contributions to retirement plans organized under Section 401(k) , which match an employee's student loan payments.
"We see it as a good benefit option for an employer, who is trying to attract and retain talent," Robinson said.
In the Senate, Sen. Rob Portman, R-Ohio, a Finance Committee member, has taken the lead in promoting such a proposal with Sen. Ben Cardin, D-Md., to allow an employer to treat an employee's student loan payments as equivalent payroll deductions for retirement savings, and permit matching contributions to a retirement plan.
While waiting for Congress to decide on potential new tax incentives and student loan aid, Steven Chung, a tax lawyer in Cerritos, Calif., and columnist at Abovethelaw.com, said it was important for lawyers dealing with the pandemic and their own student loan debts to have a flexible repayment game plan.
"If they are on an income-based repayment program, they should have a plan to either pay off the debt or to obtain loan forgiveness after the required 20- to 25-year time period," he said. "If they plan to pay off the loan in full, it is best to refinance their loans as soon as possible to get the lowest interest rate."
Despite deep partisan differences over the focus and timing of components of the next coronavirus response measure, Rep. Steve Stivers, R-Ohio, a former chairman of the National Republican Congressional Committee, predicted both parties would reach agreement on new measures to help student loan borrowers in the coming weeks.
He has been promoting his own new bipartisan proposal, H.R. 7114, to make permanent the CARES Act's one-year allowance for an employer to reimburse an employee for student loan payments capped at $5,250. The bill also would extend to the end of the year — instead of through September 2021 as would be required by the Heroes Act — two CARES Act provisions: the temporary moratorium on federal student loan payments and a ban on accrual of any interest on such suspended loan payments.
"It's a great compromise. Republicans and Democrats ought to be able to come together, even in an election year," Stivers told Law360.
--Editing by Tim Ruel and Neil Cohen.
Correction: This article has been changed to correct Chung's location and the spelling of Robinson's first name.
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