I 

113TH CONGRESS 

2D SESSION H. R. 5399 

To modify the grace period prior to the repayment period for certain Federal 

direct loans and to exclude from Federal income taxation certain employer-provided student loan assistance. 

IN THE HOUSE OF REPRESENTATIVES 

AUGUST 1, 2014 

Mr. PETERS of California (for himself and Mr. VARGAS) introduced the following bill; which was referred to the Committee on Ways and Means, 

and in addition to the Committee on Education and the Workforce, for 

a period to be subsequently determined by the Speaker, in each case for 

consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To modify the grace period prior to the repayment period 

for certain Federal direct loans and to exclude from 

Federal income taxation certain employer-provided student loan assistance. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Student Loan Repay5 ment Assistance Act of 2014’’. 


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1 SEC. 2. RESTORATION AND AN OPTION TO EXTEND THE 

2 START OF THE REPAYMENT PERIOD OF CER3 TAIN FEDERAL DIRECT LOANS. 

4 (a) RESTORATION OF INTEREST SUBSIDY DURING

5 FIRST 6-MONTH GRACE PERIOD.—Section 

6 428(a)(3)(A)(i)(I) of the Higher Education Act of 1965 

7 (20 U.S.C. 1078(a)(3)(A)(i)(I)) is amended by inserting 

8 ‘‘or, for a Federal Direct Stafford Loan for which the first 

9 disbursement is made on or after July 1, 2013, which ac10 crues prior to the beginning of the repayment period of 

11 the loan (except for interest which accrues during the last 

12 6 months prior to the beginning of such period, in the 

13 case of a student who makes an election under section 

14 2(b)(2) of the Student Loan Repayment Assistance Act 

15 of 2014),’’ before ‘‘, or’’. 

16 (b) GRACE-PERIOD EXTENSION.— 

17 (1) AMENDMENT.—Section 428(b)(7) of the 

18 Higher Education Act of 1965 (20 U.S.C. 

19 1078(b)(7)) is amended— 

20 (A) in subparagraph (A), by inserting ‘‘or, 

21 in the case of a student who makes an election 

22 under section 2(b)(2) of the Student Loan Re23 payment Assistance Act of 2014, 12 months’’ 

24 after ‘‘6 months’’; and 

25 (B) in subparagraph (D), by inserting ‘‘or, 

26 in the case of a student who makes an election 


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1 under section 2(b)(2) of the Student Loan Re2 payment Assistance Act of 2014, the 12-month 

3 period’’ after ‘‘6-month period’’. 

4 (2) ELECTION OF EXTENDED GRACE PERIOD

5 FOR CERTAIN FDSL AND FDUS LOANS.—If the un6 employment rate calculated by the Bureau of Labor 

7 Statistics is greater than the natural rate of unem8 ployment (as established by the Board of Governors 

9 of the Federal Reserve System), the Secretary of 

10 Education shall provide an opportunity for each bor11 rower who has a Federal Direct Stafford Loan or 

12 Federal Direct Unsubsidized Stafford Loan for 

13 which the first disbursement is made on or after 

14 July 1, 2013, to elect a 12-month grace period, in 

15 accordance with section 428(b)(7) of the Higher 

16 Education Act of 1965, as amended by this sub17 section, before beginning repayment. The Secretary 

18 shall— 

19 (A) notify each such borrower of the op20 portunity for such an election not later than 45 

21 days before the start of the borrower’s repay22 ment period, as determined under section 

23 428(b)(7) of the Higher Education Act of 1965 

24 as in effect on the day before the date of enact25 ment of this Act; 


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1 (B) advise each such borrower of the fi2 nancial consequences of electing such 12-month 

3 grace period; and 

4 (C) not require such a borrower to accept 

5 a 12-month grace period in accordance with 

6 section 428(b)(7) of the Higher Education Act 

7 of 1965 (as amended by this subsection), unless 

8 the borrower specifically elects such 12-month 

9 grace period not later than 14 days before the 

10 start of the borrower’s repayment period, as de11 termined under section 428(b)(7) of the Higher 

12 Education Act of 1965 as in effect on the day 

13 before the date of enactment of this Act. 

14 SEC. 3. EXCLUSION FROM GROSS INCOME OF BENEFITS 

15 UNDER CERTAIN STUDENT LOAN PAYMENT 

16 ASSISTANCE PROGRAMS. 

17 (a) IN GENERAL.—Part III of subchapter B of chap18 ter 1 of the Internal Revenue Code of 1986 is amended 

19 by inserting after section 127 the following new section: 

20 ‘‘SEC. 127A. STUDENT LOAN PAYMENT ASSISTANCE PRO21 GRAMS. 

22 ‘‘(a) IN GENERAL.—Gross income of a qualified em23 ployee does not include amounts paid or incurred by the 

24 employer for student loan payment assistance provided to 


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1 such employee if the assistance is furnished pursuant to 

2 a program which is described in subsection (c). 

3 ‘‘(b) QUALIFIED EMPLOYEE.—For purposes of this 

4 subsection, the term ‘qualified employee’ means any em5 ployee who contributes (in addition to any amount ex6 cluded from gross income under this section) not less than 

7 $50 per month for payment of principal and interest on 

8 the loans subject to the student loan payment assistance 

9 program. 

10 ‘‘(c) LIMITATIONS.— 

11 ‘‘(1) ASSISTANCE LIMITATION.—The amount 

12 taken into account under subsection (a) with respect 

13 to an individual for student loan assistance with re14 spect to student loan payments during a taxable 

15 year shall not exceed $6,000. 

16 ‘‘(2) EARNED INCOME LIMITATION.—The 

17 amount excluded from the income of an employee 

18 under subsection (a) for any taxable year shall not 

19 exceed the earned income of such employee for such 

20 taxable year. 

21 ‘‘(d) STUDENT LOAN PAYMENT ASSISTANCE PRO22 GRAM.— 

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion a student loan payment assistance program is 

25 a separate written plan of an employer for the excluVerDate Mar 15 2010 02:34 Aug 16, 2014 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5399.IH H5399

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1 sive benefit of his employees to provide such employ2 ees with student loan payment assistance which 

3 meets the requirements of paragraphs (2) through 

4 (10) of this subsection. If any plan would qualify as 

5 a student loan payment assistance program but for 

6 a failure to meet the requirements of this subsection, 

7 then, notwithstanding such failure, such plan shall 

8 be treated as a student loan payment assistance pro9 gram in the case of employees who are not highly 

10 compensated employees. 

11 ‘‘(2) DISCRIMINATION.—The contributions or 

12 benefits provided under the plan shall not discrimi13 nate in favor of employees who are highly com14 pensated employees (within the meaning of section 

15 414(q)). 

16 ‘‘(3) ELIGIBILITY.—The program shall benefit 

17 employees who qualify under a classification set up 

18 by the employer and found by the Secretary not to 

19 be discriminatory in favor of employees described in 

20 paragraph (2). 

21 ‘‘(4) PRINCIPAL SHAREHOLDERS OR OWNERS.— 

22 Not more than 25 percent of the amounts paid or 

23 incurred by the employer for student loan payment 

24 assistance during the year may be provided for the 

25 class of individuals who are shareholders or owners 


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1 (or their spouses or dependents), each of whom (on 

2 any day of the year) owns more than 5 percent of 

3 the stock or of the capital or profits interest in the 

4 employer. 

5 ‘‘(5) NO FUNDING REQUIRED.—A program re6 ferred to in paragraph (1) is not required to be 

7 funded. 

8 ‘‘(6) NOTIFICATION OF ELIGIBLE EMPLOY9 EES.—Reasonable notification of the availability and 

10 terms of the program shall be provided to eligible 

11 employees. 

12 ‘‘(7) STATEMENT OF EXPENSES.—The plan 

13 shall furnish to an employee, on or before January 

14 31, a written statement showing the amounts paid 

15 or expenses incurred by the employer in providing 

16 student loan payment assistance to such employee 

17 during the previous calendar year. 

18 ‘‘(8) BENEFITS.— 

19 ‘‘(A) IN GENERAL.—A plan meets the re20 quirements of this paragraph if the average 

21 benefits provided to employees who are not 

22 highly compensated employees under all plans 

23 of the employer is at least 55 percent of the av24 erage benefits provided to highly compensated 

25 employees under all plans of the employer. 


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1 ‘‘(B) SALARY REDUCTION AGREEMENTS.— 

2 For purposes of subparagraph (A), in the case 

3 of any benefits provided through a salary reduc4 tion agreement, a plan may disregard any em5 ployees whose compensation is less than 

6 $25,000. For purposes of this subparagraph, 

7 the term ‘compensation’ has the meaning given 

8 such term by section 414(q)(4), except that, 

9 under rules prescribed by the Secretary, an em10 ployer may elect to determine compensation on 

11 any other basis which does not discriminate in 

12 favor of highly compensated employees. 

13 ‘‘(9) CONTRIBUTIONS MADE DIRECTLY TO

14 LENDER.—A plan meets the requirements of this 

15 paragraph if all benefits provided under the plan are 

16 paid directly to the holder of the indebtedness re17 ferred to in subsection (d)(1)(A)(i). 

18 ‘‘(10) MATCHING CONTRIBUTIONS.—A plan 

19 which meets the requirements of paragraphs (2) 

20 through (9) shall not fail to be treated as a program 

21 described in this subsection merely because such 

22 plan provides for the employer to make matching 

23 contributions with respect to employee contributions. 

24 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur25 poses of this section— 


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1 ‘‘(1) STUDENT LOAN PAYMENT ASSISTANCE.— 

2 ‘‘(A) IN GENERAL.—The term ‘student 

3 loan payment assistance’ means the payment of 

4 principal or interest on— 

5 ‘‘(i) any indebtedness incurred by the 

6 employee solely to pay qualified higher 

7 education expenses (as defined in section 

8 221) which— 

9 ‘‘(I) are paid or incurred within a 

10 reasonable period of time before or 

11 after the indebtedness was incurred, 

12 and 

13 ‘‘(II) are attributable to edu14 cation furnished during a period dur15 ing which the employee was an eligible 

16 student, or 

17 ‘‘(ii) any indebtedness used to refi18 nance indebtedness described in clause (i). 

19 Such term shall not include any payment of 

20 principal or interest on indebtedness owed to a 

21 person who is related (within the meaning of 

22 section 267(b) or 707(b)(1)) to the taxpayer or 

23 to any person by reason of a loan under any 

24 qualified employer plan (as defined in section 


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1 72(p)(4)) or under any contract referred to in 

2 section 72(p)(5). 

3 ‘‘(B) ELIGIBLE STUDENT.—The term ‘eli4 gible student’ has the meaning given such term 

5 by section 25A(b)(3). 

6 ‘‘(C) DEPENDENT.—The term ‘dependent’ 

7 has the meaning given such term by section 

8 152 (determined without regard to subsections 

9 (b)(1), (b)(2), and (d)(1)(B) thereof). 

10 ‘‘(2) EARNED INCOME.—The term ‘earned in11 come’ shall have the meaning given such term in 

12 section 32(c)(2), but such term shall not include any 

13 amounts paid or incurred by an employer for stu14 dent loan payment assistance to an employee. 

15 ‘‘(3) EMPLOYEE.—The term ‘employee’ in16 cludes, for any year, an individual who is an em17 ployee within the meaning of section 401(c)(1) (re18 lating to self-employed individuals). 

19 ‘‘(4) EMPLOYER.—An individual who owns the 

20 entire interest in an unincorporated trade or busi21 ness shall be treated as his own employer. A part22 nership shall be treated as the employer of each 

23 partner who is an employee within the meaning of 

24 paragraph (3). 

25 ‘‘(5) ATTRIBUTION RULES.— 


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1 ‘‘(A) OWNERSHIP OF STOCK.—Ownership 

2 of stock in a corporation shall be determined in 

3 accordance with the rules provided under sub4 sections (d) and (e) of section 1563 (without re5 gard to section 1563(e)(3)(C)). 

6 ‘‘(B) INTEREST IN UNINCORPORATED

7 TRADE OR BUSINESS.—The interest of an em8 ployee in a trade or business which is not incor9 porated shall be determined in accordance with 

10 regulations prescribed by the Secretary, which 

11 shall be based on principles similar to the prin12 ciples which apply in the case of subparagraph 

13 (A). 

14 ‘‘(6) UTILIZATION TEST NOT APPLICABLE.—A 

15 student loan payment assistance program shall not 

16 be held or considered to fail to meet any require17 ments of subsection (c) (other than paragraphs (4) 

18 and (8) thereof) merely because of utilization rates 

19 for the different types of assistance made available 

20 under the program. 

21 ‘‘(7) DISALLOWANCE OF EXCLUDED AMOUNTS

22 AS CREDIT OR DEDUCTION.—No deduction or credit 

23 shall be allowed to the employee under any other 

24 section of this chapter for any amount excluded from 


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1 the gross income of the employee by reason of this 

2 section. 

3 ‘‘(8) TREATMENT OF SALARY REDUCTION

4 AMOUNTS.—Any matching contribution withheld 

5 from an employee under a student loan payment as6 sistance program pursuant to a salary reduction 

7 agreement shall be treated for purposes of this title 

8 as an amount paid by the employee and not as an 

9 amount paid by the employer.’’. 

10 (b) CONFORMING AMENDMENTS.—Sections 

11 221(d)(2)(A), 414 (n)(3)(C) and (t)(2), 3121(a)(18), 

12 3306(b)(13), 3401(a)(18), and 6039D(d)(1) of such Code 

13 are each amended by inserting ‘‘127A,’’ after ‘‘127,’’. 

14 (c) CLERICAL AMENDMENT.—The table of sections 

15 for part III of subchapter B of chapter 1 of such Code 

16 is amended by inserting after the item relating to section 

17 127 the following new item: 

‘‘Sec. 127A. Student loan payment assistance programs.’’. 

18 (d) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to taxable years beginning after 

20 the date of the enactment of this Act. 

21 SEC. 4. DEDUCTION FOR STUDENT LOAN PAYMENTS WHICH 

22 ARE MATCHED BY AN EMPLOYER. 

23 (a) IN GENERAL.—Part VII of subchapter B of chap24 ter 1 of the Internal Revenue Code of 1986 is amended 


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1 by redesignating section 224 as section 225 and by insert2 ing after section 223 the following new section: 

3 ‘‘SEC. 224. DEDUCTION FOR STUDENT LOAN PAYMENTS 

4 WHICH ARE MATCHED BY AN EMPLOYER. 

5 ‘‘(a) IN GENERAL.—In the case of an individual who 

6 is a qualified employee (as defined in section 127A), there 

7 shall be allowed as a deduction an amount equal to the 

8 student loan payments made by such individual with re9 spect to which an employer of such individual makes 

10 matching contributions under a student loan payment as11 sistance program which are excludible from the gross in12 come of such employee under section 127A. 

13 ‘‘(b) ANNUAL LIMITATION.—The amount allowable 

14 as a deduction under subsection (a) with respect to any 

15 individual for any taxable year shall not exceed $6,000. 

16 ‘‘(c) LIFETIME LIMITATION.—The amount allowable 

17 as a deduction under subsection (a) with respect to any 

18 individual for any taxable year shall not exceed the excess 

19 of— 

20 ‘‘(1) $50,000, over 

21 ‘‘(2) the aggregate amount allowable as a de22 duction under subsection (a) with respect to such in23 dividual for all prior taxable years. 

24 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—Any amount 

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1 tion 127A shall not be treated as an amount paid by such 

2 individual for purposes of this section. The amount of 

3 principal and interest with respect to which a deduction 

4 is allowed under this section shall not be taken into ac5 count in determining the amount of any other deduction 

6 or credit allowed under this chapter.’’. 

7 (b) CLERICAL AMENDMENT.—The table of sections 

8 for part VII of subchapter B of chapter 1 of such Code 

9 is amended by redesignating the item relating to section 

10 224 as an item relating to section 225 and by inserting 

11 after the item relating to section 223 the following new 

12 item: 

‘‘Sec. 224. Deduction for student loan payments which are matched by an employer.’’. 

13 (c) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to taxable years beginning after 

15 the date of the enactment of this Act. 

Æ 


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