Cory Gardner in Senate building
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Employers could be encouraged to offer their workers student loan help in addition to health insurance, retirement plans and other benefits under a new plan from Colorado Sen. Cory Gardner.

The Republican senator introduced the Student Loan Repayment Acceleration Act on Thursday as a way for employers to make annual tax-free contributions toward employees’ student loans. The debt relief plans would work like 401(k)s, according to Gardner.

Collectively, tens of millions of Americans owe a record $1.5 trillion in student loans, according to Federal Reserve data from the second quarter of 2018.

“Student loan debt makes it harder and harder for graduates to get ahead,” Gardner says in a statement.

“I’m hopeful my legislation can make it easier to pay off loans by allowing employers to contribute to their employees’ student loans like many do for 401(k) plans. Every little bit helps, and this can be a model for further policies to deal with the growing problem of student loan debt.”

How the plan would work

The Student Loan Repayment Acceleration Act would allow companies to annually contribute up to $10,000 toward each of their workers’ existing student loan debts. The contributions would be free from payroll, income and federal unemployment taxes.

Under the plan, employers could choose from a variety of ways to structure the student loan help programs. One option: Offer to match the payments employees’ make. This would be similar to 401(k) matches offered by some companies.

Hundreds of companies are already paying off their employees’ student loans, according to CNBC. And some financial service firms are offering options for employers’ plans to make contributions for their workers student loan debt. Earlier this year, Fidelity Investments introduced the Student Debt Employer Contribution Program. Similar programs are likely to pop up if the Student Loan Repayment Acceleration Act makes it out of Congress.

If passed, the legislation would be another tool from the government to help reduce the rising cost of education along with the student loan interest deduction, lifetime learning credit and American opportunity tax credit.

Last year, Reps. Rodney Davis, R-Ill., and Scott Peters, D-Calif., introduced similar legislation in the House. Their Employer Participation in Student Loan Assistance Act would allow companies to provide $5,250 in student debt relief. The assistance would be tax-free.