Young people who graduated college with student loans to pay will get some relief retiring the debt if Rep. Robert Dold (R-Kenilworth) successfully shepherds his latest proposed legislation through Congress.
Dold, who still has his own outstanding student loans, will soon introduce his Higher Education Loan Payments for Students and Parents Act (HELP), offering federal income tax incentives to help ease the burden.
Aggregate student loan debt in the country is $1.3 trillion with the average load for a graduate at $30,000, according to information provided by Dold’s office. He said the issue is foremost on the minds of college age people and their parents as well as the debtors themselves. He said it impacts financial decisions.
“They’re not enrolling in 401ks,” Dold said. “They’re much more concerned with their debt.”
The HELP Act will make changes to the Internal Revenue Code, allowing a member of the workforce with student debt to direct his or her employer to make payments up to $5,250 a year directly to the loan servicer, according to Dold. He said this reduces the person’s taxable income by the deducted amount.
Should the employer elect to make a contribution as the organization would to a 401k, the boss gets a 50 percent tax credit, according to Dold.
The proposed law also lets the money contributed to a college savings account by an employer be deducted from the parents’ taxable income, according to Dold. He said the employer also gets a tax credit.
As a member of Congress, Dold said he is ineligible to use the incentives either for himself or for a college savings plan for his children. He earns $174,000 a year as a representative.
Dold, 46, with an undergraduate degree from Dennison University, a law degree from Indiana University and an MBA from Northwestern University, said he still has student debt. He said it is between $10,000 and $15,000.
While Dold described the bill as a “win, win, win” helping students, parents and employers, he concedes there is still a lot of work to be done.
“This isn’t a silver bullet,” Dold said. “We have to keep looking for other ways to make higher education more affordable.”
One person with other ideas is former Rep. Brad Schneider (D-Deerfield) who will face Dold in the Nov. 8 general election. The matchup will be their third in the last three Congressional contests.
While Schneider gave some of the same statistics as Dold, he said he talked to one parent whose child will finish medical school $300,000 in debt. Schneider said that when he was in Congress he co-sponsored a bill allowing students to refinance their debt when rates dropped. It did not pass.
“They should be able to refinance when there is a decrease in the cost of borrowing,” Schneider said. “The government is making money on these loans. The government should not make a profit on student loans.”
Schneider, 54, also knows something about student debt. When he graduated from Northwestern with his MBA in 1988, he owed $50,000. He said he was the beneficiary of good times then not the recession and slow recovery affecting young people today.
“It was a strong economy and I was able to pay it off,” Schneider said.
Some of Dold’s other ideas on affordability of education include taking college level courses in high school and going to community college for part of a student’s tenure, shortening the time tuition will be at its highest.
“At Purdue University there is a three-year degree program,” Dold said.
Schneider also said community college is a good route as well as focusing on going to an in-state school.
The aggregate student debt of $1.3 trillion is more than the total amounts owed on credit cards, automobiles or home equity loans, according to Schneider.