Recent college graduates looking for employment or workers thinking about switching jobs are likely focused on locating available opportunities in their field, understanding how their experience stacks up and researching hiring organizations. Getting information on total compensation is also a significant factor — including salary, health benefits and paid time off — and, depending on the employer, whether it will help pay off their student loans.
In the years prior to the coronavirus crisis, an increasing number of companies and organizations were offering help for employees paying back student loans. As the COVID-19 pandemic continues, student loan assistance programs offered by employers is anticipated to expand to even more employees, thanks partly to provisions in the second federal coronavirus stimulus and relief package.
[Read: What to Know About Federal Student Loan Repayment Options.]
The Consolidated Appropriations Act of 2021, signed into law by then-President Donald Trump on Dec. 27, 2020, allows employer-provided student loan repayment as a tax-free benefit to employees for five additional years, extending CARES Act relief first made available in March 2020.
This means that through Dec. 31, 2025, employers can choose to make tax-exempt annual contributions of up to $5,250 per employee toward eligible education debt. The funds allocated for this student loan assistance do not count toward an employee’s gross taxable income.
Here are answers to five commonly asked questions about the employer-provided student loan repayment benefit.
How Do Employers Provide Student Loan Repayment Help?
The $5,250 limit is the maximum amount per employee that employers may contribute toward repayment of student loans taken out for tuition and related expenses such as fees and books, as spelled out under Section 127 of the federal tax code.
[Read: What Expenses You Should Cover With Student Loans.]
One of the best parts about this benefit is you don’t have to do much coordination with the student loan servicer or lender. Companies that offer student loan assistance pay them directly.
If your employer offers this benefit, the human resources department or employee benefits group can share the right documentation and information with you to get you signed up.
I Paused Student Loan Payments Under CARES Act Relief. Now What?
Through the most recent extension of coronavirus-related economic relief, the U.S. Department of Education now allows most federal student loan borrowers to pause payments through Sept. 30, 2021, without interest accruing on their debt. Extending the reprieve beyond the previous deadline, Jan. 30, 2021, was one of the first actions taken by President Joe Biden’s new administration.
However, even if you opted to accept the automatic pause, your employer can still make payments on your student loans. Those payments would be applied directly to your loan’s principal after all the interest that accrued before March 13, 2020 — and fees on any defaulted loans — have been paid.
What Are the Tax Implications?
As stipulated by the relief package in December, employers can make tax-free contributions of up to $5,250 a year to their employees’ student loan debt. That means neither the company nor the employee will have tax liability for the money applied to student loan payments.
[READ: How to Get the Student Loan Interest Deduction.]
How Long Will This Benefit Be Available?
The provision for employer student loan repayment assistance will end Dec. 31, 2025. Some student loan experts anticipate that the federal program will be extended beyond that, possibly becoming permanent.
What Can I Do if My Employer Doesn’t Participate?
If your employer does not offer this benefit, you’re not alone. Research from the Society for Human Resource Management found that only around 8% of organizations provided student loan repayment as an employee benefit in 2019, although that doubled from 2018.
A good step is to contact your employer’s HR or employee benefits department to let them know of the availability of this program, being sure to point out the favorable tax advantage available to both the company and employees. Remind them that by offering the benefit of employee student loan contributions, they will likely improve employee recruitment and retention.
In addition, your employer will be doing its part to reduce a major stress on the overall economy, especially in a time of economic fallout from COVID-19 shock.
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How Second Stimulus Bill Affects Employer Student Loan Repayment Benefit originally appeared on usnews.com
