Nebraska employers would receive a tax credit for repaying qualified employees’ student loans under a proposal heard Jan. 28 by the Revenue Committee.
Under LB69, introduced by Omaha Sen. Jen Day, businesses could apply to the state Department of Revenue for the nonrefundable income tax credit, which would be available for tax years beginning Jan. 1, 2022.
The credit would equal 50 percent of the student loan repayment made by an employer on behalf of an employee, up to $1,800 for each qualified employee. A business could earn credits for up to 20 employees each taxable year.
Day said the credit would encourage the pursuit of higher education and help employers recruit and retain talented workers. A 2019 Blueprint Nebraska report found that approximately 3,000 Nebraskans with bachelor’s degrees leave the state each year, she said.
“Not only are we losing talented workforce, but we’re losing taxpayers to other states,” Day said. “In many cases, we’re making the expensive investment for youth on the education side and then watching the other states get the benefit.”
A qualified employee would be a college graduate who worked for the employer for at least 480 hours during the taxable year and who received a student loan to attend a postsecondary educational institution.
The department could approve up to $1.5 million in credits each year. At least 25 percent would go to employers with no more than 30 employees or that are located in first- or second-class cities or villages in Nebraska.
The department estimates that LB69 would reduce state general fund revenue by $1.4 million each year beginning in fiscal year 2022-23.
Mike Riordan of BenefitEd testified in support of the bill. He said businesses could use the proposed credit as a way to differentiate themselves from employers in other states when recruiting and retaining workers. Employers that already offer student loan repayment benefits have reported decreased turnover rates and quicker hiring, he said.
Mike Baumgartner, executive director of the Coordinating Commission for Postsecondary Education, also testified in support, saying that the state continues to struggle with out-migration of college graduates with a bachelor’s degree or higher.
As of September 2020, he said, more than 242,000 Nebraskans owed a total of $7.7 billion in federal student loan debt, and the average graduate of a four-year public educational institution owes a median of $20,000.
Baumgartner said several studies have found that student loan debt impacts where students settle and can inhibit homeownership, entrepreneurship and family formation. He said student borrowers from rural areas, especially those with high loan balances, are more likely to live and work in metro areas after graduation.
“The tax credit established by LB69 would be a helpful tool for addressing out-migration, in-migration and migration within the state to urban areas,” Baumgartner said.
No one testified in opposition to the bill and the committee took no immediate action on it.