ILMA Compoundings - February 2020 - 33

reimbursement, and it's important
to note the distinction. Tuition
reimbursement is when employers
pay for current educational pursuits
of their employees. For example, a
manufacturing company might pay
for a portion or all of an employee's
coursework toward an engineering
degree or an MBA.
Numerous big-name companies
have and continue to offer tuition
reimbursement, such as AT&T,
Chipotle, Home Depot, Proctor &
Gamble, UPS, Verizon and many
more, large and small.1
Adams noted how this distinction is
significant for HR professionals. "One
of the few downsides [of a student
debt repayment program] would be
that it's more of a recruitment tool;

it's not an education reimbursement
aimed at improving employee skills,"
he said.
In other words, offering to pay down
some of the debt of employees might get
them in the door and help keep them
around. But it might give a company
less flexibility to develop employees
with the skills and education it needs
in its workforce relative to a program in
which employers help pay for approved
ongoing or future coursework specifically related to their business.
TAX CONSIDERATIONS
There are important tax considerations with any employee benefit
program. In general, whenever someone receives something of value, it is
subject to income tax. The extensive
U.S. tax code creates numerous
exceptions to incentivize certain
activities and behaviors. Tuition
reimbursement, for example, is tax
deductible up to $5,250 per employee
per year under Section 127 of the
U.S. tax code.2 Simply increasing
an employee's salary by that same
amount would result in a significant
portion going toward income taxes;
however, the same does not currently
apply for student loan debt that has
already been incurred.3
Federal legislation has been
proposed to give student loan debt
repayment support from employers
the same treatment, but the legislation
has yet to make it to law.4 Adams has
been following this legislation and
notes that the lack of a tax deduction

for such programs at present makes
it hard for HR leaders like himself
to justify student debt repayment
incentive plans.
It's no secret that the face of the
workforce of today and the near future
is that of the millennial. It's also no
secret that this cohort is saddled with
historic levels of student debt and
that this debt represents a significant
consideration when selecting an
employer. Currently, there may be
little difference in paying an employee
an extra $5,000 per year in standard
salary compensation and offering to
pay $5,000 toward the repayment
of their student loans. But pending
legislation could make the student
loan repayment bargain tax-free and
potentially a win for both employer
and employee.
1. "Companies that Offer Tuition Reimbursement
Programs," The Balance;
www.thebalancecareers.com/companies-offer
-tuition-reimbursement-4126637
2. "26 U.S. Code §127. Educational assistance
programs," Legal Information Institute;
www.law.cornell.edu/uscode/text/26/127
3. "Encourage Employers to Help with Student
Loan Debt," Progressive Policy Institute; www.
progressivepolicy.org/wp-content/uploads
/2019/05/PPI_POLICYSHORT_SLRP-V2-2.pdf
4. "Warner, Thune Introduce Legislation to
Address Student Debt Crisis,"
Mark R. Warner; www.warner.senate.gov/public
/index.cfm/2019/2/warner-thune-introducelegislation-to-address-student-debt-crisi

Grensing is a Minneapolis-based
freelance writer.

33

http://www.thebalancecareers.com/companies-offer-tuition-reimbursement-4126637 http://www.law.cornell.edu/uscode/text/26/127 https://www.progressivepolicy.org/wp-content/uploads/2019/05/PPI_POLICYSHORT_SLRP-V2-2.pdf http://www.warner.senate.gov/public/index.cfm/2019/2/warner-thune-introduce-legislation-to-address-student-debt-crisis http://www.warner.senate.gov/public/index.cfm/2019/2/warner-thune-introduce-legislation-to-address-student-debt-crisis

ILMA Compoundings - February 2020

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