Employers to Pay Student Debt with New COVID-19 Relief
The US Government has worked hard to provide assistance to the American people due to the economic effects due to the Coronavirus pandemic. One of the relief opportunities they are providing is a temporary tax incentive allowing companies the ability to pay employees’ student debt.
In addition to the CARES Act pausing payments and interest for student loans through September 30th. Employers can contribute to their employees student loan balance and the payment will be free from income and payroll taxes. Originally payments from employers to assist with student loan repayment would be considered as a form of income to the employee. Therefore the employer and employee would have to pay income and payroll taxes on that amount.
With this government provided relief, employers can pay up to $5,250 towards their employees’ student loan balance and it will not be included in their 2020 gross income.
In reality, fewer than 10% of companies offer some sort of student loan repayment options. In 2019 more than 60% of employed adults moved to a company that offered student loan assistance as a benefit.
The question remains if employers will take up this assistance offered by the government, as many companies do not currently have a student loan benefit program in place. If they are interested in taking the government up on this assistance, it is crucial that they work to set up a clear and defined program before jumping on to receive this tax incentive.