The private sector adopts all sorts of things -- highways, parks, medians, pets, pet projects -- so why not student loans? With the right tax incentives, an Adopt-a-Student Loan program could help ease the current financial quagmire of $1.3 trillion in student loan debt.
Earlier this week, Starbucks announced a plan that will let any of its 135,000 employees go to college for free -- as long as they meet the criteria outlined in the new policy. While many employers offer help to employees who want to get a college degree, and critics decried the finer points of the deal with Arizona State University, Starbucks deserves at least a tip of the hat as well as a wag of the finger.
The new Starbucks policy points to a willingness in the private sector to tackle the problem of financing higher education in America. And faced with a deepening student loan debt crisis, the private sector -- corporations and regular citizens -- can and should make it a top priority to get a handle on the growing problem of student loan debt.
President Obama’s recently announced plan to expand the repayment cap on federal student loans and Elizabeth Warren’s now-dead bill that would have allowed 25 million Americans to refinance debt at lower rates both focus on the real-world impact of the student loan problem. In reality, both moves capitulate to the problem of graduation-to-grave debt. It’s time to stop making the prison-house of student loan debt more comfortable, and find a way out.
Instead, Adopt-a-Student Loan could be a big-picture solution, targeting the $1.3 trillion in federal student loans and loan guarantees, as well as the more than $100 billion in private student loans that aren’t federally guaranteed.
With an average $29,400 per bachelor’s degree, student loan debt impedes economic growth. Money that would otherwise be going toward a car, retirement and all the non-essential consumer expenditures that grow the economy are going toward debt instead. And while $30K is a lot of money, there are ways to get your arms around it -- especially with a little help from the IRS, a friendly employer, or generous friends who see the upside of paying a college education forward.
Whether an Adopt-a-Student Loan program or free employer-sponsored education is the answer, only time will tell, but it’s time for Americans to step up with solutions. I’ve got a few ideas to start the conversation. Whether that takes place on Twitter, in the comments below, or at your dinner table: It’s time for all of us to step up and figure out ways to stop the debt.
What Businesses Would Need to Do
The Adopt-A-Student-Loan program should be relatively simple in its basic formulation. Businesses in the U.S. volunteer to pay one or more student loans of a current or prospective employee. The particulars could manifest themselves in any number of ways, but the bottom line is this: Businesses in America would begin to help solve this crisis very directly.
Granted, the incentive for such a scheme might be lacking from a CFO's perspective, but consider the recruitment value in offering new employees help paying down their debt as part of their compensation package, which would be huge. It worked for Tom Cruise in “The Firm.”
Were companies given incentive in the form of a tax break, or even a tax credit, still more could be accomplished. For instance, they could adopt the debt of their employees.
The win-win of this Adopt-a-Student Loan program would take the form of focused employees who are loyal, which should have a huge impact on job performance and productivity. The extra cash in employees’ pockets would become revenue as it entered the economy in the form of increased spending.
Additionally, such a program would be both a boon to recruitment and retention efforts.
What the Federal Government Would Need to Do
Currently there is a $14,000 limit on non-taxable gifting, but that could be increased to facilitate this program, with the trigger being money that went directly to pay down student loan debt.
In addition to the possibility of an abatement or credit for corporations that pay down employee student loan debt, a government abatement on the estate tax might be popular, allowing regular Americans to pay down a third party’s student loan debt before the taxable portion of an estate goes to the IRS. In fact, if the federal government used these types of tax breaks to take on this trillion-dollar time bomb, one can envision a system in which anyone could crowdfund their student loan debt. It may be a crazy idea, but sometimes it takes a crazy idea to solve a crazy problem… and our student loan situation has reached insane proportions.
Whether you advocate a Hunger Games solution or something more real world-ready, I look forward to hearing your ideas for ending the student loan debt nightmare, so the odds can be ever in our future graduates’ favor.
Adam Levin is chairman and co-founder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.