Nearly a quarter-million Nebraskans have student loan debt, owing $7.7 billion to the federal government as of September 2020, according to a report from the U.S. Department of Education.
Mike Baumgartner, executive director of the Nebraska Coordinating Commission for Postsecondary Education, said the amount might be staggering to consider, but it's a tiny slice of a larger pie.
"That's a small part of the $1.5 trillion nationwide," Baumgartner told the Legislature's Revenue Committee on Thursday.
Although the median college debt in Nebraska is roughly $20,000 — well below the $32,700 national average — many college graduates are leaving the state for higher-paying employment opportunities.
Sen. Jen Day of Gretna said other states are benefitting by grabbing Nebraska-educated workers, and the so-called "brain drain" has led to a shortage of high-skilled workers in the state.
Between 2007-17, Day said a total of 15,000 college graduates left Nebraska, exacerbating shortages in tech and health care sectors.
She said creating incentives for employers and employees around paying down student debt may slow down that trend, and mitigate future economic struggles Nebraska may face.
In her bill (LB69), employers who help pay down their employees' student loans would be eligible for a nonrefundable tax credit of up to 50% of the amount paid, up to $1,800 per employee per year.
Day said her bill "keeps skin in the game for everyone involved." It doesn't provide wholesale student loan forgiveness, nor does it give businesses a 100% tax credit for making student loan payments.
The total credits would be capped at $1.5 million annually, Day said, with at least 25% of the credits being set aside for small businesses with fewer than 30 employees.
"Nebraska has some really robust corporate tax incentives for very large businesses, and I have always wished we did better as a state to support ... small, locally created and locally owned businesses," Day said.
Education groups backed the plan, saying it provided an incentive to both employers and employees.
If employers paid a total of $3,600 toward an employee's student loan debt — the amount needed to qualify for the full $1,800 tax credit — and if employees matched that amount, most college graduates could pay off their loans in four years, said Treva Haugaard, executive director of the Council of Independent Nebraska Colleges.
"This type of employer incentive allows a recent graduate to have hope that they will not continue to be in debt for the following 10 years," Haugaard said.
Once that debt is paid off, those employees will have more disposable income to help generate economic activity, she added.
Baumgartner told the committee LB69 would help prevent college graduates from leaving the state, would lure college graduates to Nebraska and potentially keep more Nebraskans in rural areas of the state.
Joey Adler, director of strategic engagement at the Holland Children's Movement, pointed to a 2017 survey by American Student Assistance that found 92% of people between the ages of 22 and 33 said they would take a job that offered student loan repayment as a benefit, while 86% indicated they would commit to staying in that job for five years.
Day also said the program wasn't just for 20-somethings fresh out of college. There are 19,000 Nebraskans over the age of 60 who carry student loan debt, she said.
The Revenue Committee did not take action on LB69 on Thursday.
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