Des Moines Register
03-13-07
Bill would let employers pay back student loans
It's part of an idea to keep young professionals in the state. Backers say it would
benefit all parties involved.
By JENNIFER JACOBS
REGISTER STAFF WRITER
One way Iowa can keep young people in the state is for employers who hire
them to pay back all or part of their student loans in exchange for a tax credit
from the state, one professor says.
College graduates could see their loan debt - up to $25,000 - erased within three
years under House File 730, a bill supported by Democrats and Republicans in
the Iowa Legislature.
Employers would have a competitive edge over those in neighboring states with
an unusual way to recruit new graduates for hard-to-fill or competitive jobs, said
University of Iowa business professor Jay Christensen-Szalanski, who came up
with the idea.
Businesses, which would shoulder most of the cost of the loan repayment, would
save labor costs in reduced turnover, he said. State tax credits would offset 30
percent of the cost.
"Once you have me for three years, I'm ready to put down roots and buy a
house," Christensen-Szalanski said. "It's not, 'I'll train here for one year, and
when I see greener pastures ... I'll go.' "
The state would have the advantage of having more young people in its work
force and would have a new incentive for businesses to locate or expand in Iowa,
he said. The state would then get new income-tax money from the new jobs.
Under the proposal, employers could pay up to 20 percent of a worker's loan
debt for the first tax year, up to 30 percent for the second tax year, and up 50
percent for the third tax year - for a total of 100 percent, up to $25,000. In return,
the state would cover a total of 30 percent of the cost through tax credits - a
maximum of $7,500 - to the employer over the three-year period.
The proposal is only for undergraduate education loans.
But any graduate would qualify, whether he or she graduated from an Iowa
school or not.
"If you've got a child who went to school on the East Coast and he wants to come
back, this might get him here," said Christensen-Szalanski, who lost a bid for an
Iowa City Senate seat to incumbent Joe Bolkcom last fall. "We are saying we are
in the market for the best students from anywhere."
And for the first year, even current Iowa employees would qualify. That's so a
young Iowan who works at, say, an insurance company and has $35,000 in debt
from Illinois' Northwestern University, doesn't switch jobs simply to get the loan
help, he said.
For employers to be eligible for the tax credit, the business must pay a salary or
wage of at least $25,000, employ the person for a job within the state, and start
repaying the student loan within six months of the hiring date.
Tami Wiencek, a Republican from Waterloo, said the plan could be a solution for
slowing the "brain drain." For example, Iowa State University saw about 35
percent of its 2005 graduates leave the state. About 30 percent of this year's
freshmen are from outside Iowa.
Several statewide Iowa business groups and officers are endorsing the proposal.
Luring young professionals
WHAT: A plan that would allow businesses that pay a new employee's student
loan debt - up to $25,000 over three years - to get tax credits.
THE IDEA: The Iowa Advantage Fund legislation, House File 730, is sponsored
by Reps. Jeff Kaufmann, a Republican from Wilton; Tami Wiencek, a Republican
from Waterloo; and Dawn Pettengill, a Democrat from Mount Auburn. Sen. Joe
Bolkcom, a Democrat from Iowa City, is filing a companion bill in the Senate. The
idea was developed by University of Iowa professor Jay Christensen-Szalanski.
WHAT'S NEXT: It will be considered by the Ways and Means committees in the
Iowa House and the Iowa Senate.
How it would work
Say a University of Iowa graduate with $25,000 in student loans gets a $35,000a-year job in Iowa.
Her employer can pay up to 20 percent of her student loans - or $5,000 - the first
year. The employer in turn gets a $1,500 tax credit, or 30 percent of the
employer's cost.
The second year, the employer can pay up to 30 percent of her initial debt - or
$7,500 - in exchange for a $2,250 tax credit.
And the third year, the employer can pay up to 50 percent - or $12,500 - for a
$3,750 tax credit.
Although the employer's payout is bigger than the tax-credit reward, the plan
would encourage the worker to stick around, thus reducing turnover costs,
supporters say.
The state gains because the student pays about $2,000 in state income taxes.
She will likely pay more sales taxes because, without the loan debt, she's buying
more goods from various businesses.
Reporter Jennifer Janeczko Jacobs can be reached at (515) 284-8127 or
jejacobs@dmreg.com