Pennsylvania lawmakers are considering offering a tax credit to help parents reduce the burden of student debt. Specifically, the credit to offset student debt from Pennsylvania is for employers who contribute to their employees’ tuition savings account. The Pennsylvania House has already approved the bill and is now heading to the Senate.
Credit to offset student debt from Pennsylvania: what is it?
Last week, the Pennsylvania House unanimously approved legislation that offers tax credits to employers who help employees with student debt. The legislation allows employers to contribute up to $500 per year to an employee’s tuition savings account for a credit of 25% of the employer’s total contributions.
Tuition savings accounts, such as a 529 plan, help parents pay for educational expenses, including tuition, room and board, and books at K-12 schools and college or career training programs.
Those in favor of the credit to offset student debt from Pennsylvania believe the legislation could help significantly reduce the burden of debt on students. The student debt stands at $1.77 trillion nationally.
Employers who participate in the program need to make contributions equally to all employees with tuition savings accounts. As per an estimate by the Department of Revenue, about 600,000 tuition savings accounts are owned by employees in Pennsylvania.
If the credit to offset student debt is approved, it will cost the state about $65.7 million annually, provided each eligible account receives the maximum contribution.
Pennsylvania needs more of such measures
Pennsylvania ranks bottom in many college affordability measures, including high tuition rates, less contribution toward higher education and more. Hopefully, the legislation, if approved, will help Pennsylvania move up in the college affordability ranking.
Moreover, in recent months, Pennsylvania has considered a few more bills to reduce the burden of student loans on parents and students. For instance, in December last year, lawmakers considered creating a state tax deduction for interest paid on student loans.
Rep. Mary Isaacson, who is also the sponsor of the bill, said the proposal is similar to the federal deduction and will encourage more students to settle in the state long-term.
Pennsylvania needs more of such measures, considering the student loan debt in the state has almost quadrupled in the last two decades to $76 billion from $19 billion. The student loan debt number is higher than the state’s entire budget.
Pennsylvania graduates rank third in terms of debt load, while the state ranks sixth in terms of the number of students graduating with debt. More than two million residents have over $39,000 in student debt, according to the data from the Keystone Research Center.
More students have moved toward student debt because of the widening gap between the rise in income and tuition cost. Tuition costs have risen by 47% in 20 years, but the median household income has grown only by 13% during the same time period.
