Gov. Paul LePage on Monday offered some details on a plan to reduce student debt and entice college graduates to stay in Maine. One of the options he laid out in his State of the State letter was an option to let employers who make payments on a worker’s student loans claim a tax credit.
Although the governor periodically has teased details about this plan during town hall meetings and during his 2014 re-election campaign, he has not submitted this proposal to the Legislature, despite the claim he made in his State of the State letter, according to an online listing of governors’ bills.
LePage’s focus on incentivizing employers to help reduce their workers’ debt is an idea that has gained some traction in Congress: In January, two Senate Republicans and a Democrat put forward a bill to allow employers to contribute up to $5,250 pre-tax to paying off their workers’ student loans, which the senators billed as a recruitment tool for businesses.
Other recent congressional proposals include a bill that would allow employers to make payroll and income tax-free student debt payments for workers.
Michelle Asha Cooper, president of the Institute for Higher Education Policy, called it “an emerging trend” around the national student debt conversation.
LePage’s policy proposal isn’t bold or new: The state already offers employers a tax credit for student loan payments made by individuals and employers. It’s called Opportunity Maine. And this credit has not proven to be a transformative tool in attracting and retaining young workers in the state.
An opportunity for Maine?
For nearly a decade, state lawmakers have tried to entice college graduates to stay in Maine by helping them reduce their debt burden with the Educational Opportunity Tax Credit, the formal name for Opportunity Maine.
Graduates from Maine universities carry the sixth-highest debt burden in the nation, with an average debt of more than $30,000, according to a 2015 report by the Institute for College Access and Success.
Under Opportunity Maine, a graduate with a bachelor’s degree who makes regular monthly payments on student loans can claim a tax credit of up to $4,356 per year, while an associate degree holder can claim up to $792 per year.
When Opportunity Maine first became available Jan. 1, 2009, the only people eligible for it were Maine residents who attained any degree at a college or university in Maine, as well as employers who made payments on their employees’ student debt. Over time, legislators have continued to expand eligibility to include any college graduate, even if they weren’t born in Maine or didn’t attend a Maine school, so long as they live and work in Maine.
Legislators made this change to provide Maine employers additional leverage in recruiting and retaining recent college graduates. An employer who makes student loan payments for a worker with a bachelor’s degree can claim a credit for up to $4,500 per year while the employer can claim a credit of up to $840 per year for loan payments on a worker’s associate degree.
But no businesses have claimed the credit, according to Maine Revenue Services, suggesting few if any employers are using this credit in their recruitment efforts.
As for the Opportunity Maine credit’s effectiveness in enticing college graduates to stay in Maine, there’s no evidence of it. Nearly 4,000 graduates received the credit last year. Would they be working in other states now absent the credit, or would they be working in the state either way and they simply claimed the credit? Right now, there is no measurement in place to determine whether the credit is achieving its mission.
An emerging benefit
Bruce Elliott, manager of compensation and benefits at the Society for Human Resource Management, a national organization, doubts a tax credit will motivate employers to help reduce their workers’ student debt: Employers who offer employees assistance with loan repayment offer the benefit because they want to attract higher-quality workers and keep them to minimize turnover.
But student loan repayment is still an uncommon perk. Just 3 percent of U.S. employers offered student loan repayment to workers last year, according to a Society for Human Resource Management survey.
Elliott said student loan repayment is “a relatively new benefit” employers have begun offering in the last couple of years as competition has grown to woo the growing ranks of millennials in the labor force.
“While the survey shows there is low participation, there is a pent-up demand for this benefit and there are signs that more employers will begin to offer it,” he said.
Even though few employers offer this benefit, it’s a highly coveted perk among millennials. A 2015 survey by iontuition, a student loan management company, found that 80 percent of millennials, who carry a higher student debt burden than previous generations, would prefer to work for an employer who offers student loan repayment as a benefit.
Right now, the workers who benefit from this perk tend to be employed in elite companies in the professional services industry, such as New York-based accounting firm PricewaterhouseCoopers. The average benefit these employers offer is about $1,000 per year in student loan assistance, often with a five-year cap, Elliott said.
“They’re not doing this to be nice or altruistic,” he said. “They’re expecting a return on investment — to pull from the top of the talent pool.”
BDN writer Michael Shepherd contributed to this report.