Under last year’s CARES law, employers were pressured to repay student loans for workers – they were able to do it, tax free, up to $ 5,250 a year. When Congress passed the Consolidated Appropriations Act of 2021, this arrangement was extended until 2025.
By next year, many large companies will likely add this benefit for their workers, having had time to change their IRS Section 127 education assistance programs, Laurel Taylor said, CEO of FutureFuel.io, a company that works with employers and individuals on student loan debt. More than 70% of employers offer tuition reimbursement assistance to workers, making it a more common benefit than a 401 (k) match, Taylor said. However, only about 7% of their budgets for these programs are spent, and student loan contributions would be an easy way to use more of them, she said.
“Employers have a budget that they’ve set aside that just isn’t being used,” she said.
Currently, around 8% of large employers offer loan repayment assistance, up from 4% in 2018, said Lydia Jilek, senior director of voluntary benefits solutions at Willis Towers Watson. Another 3% of companies plan to provide this benefit next year, although a third of employers say they are interested in doing so, Jilek said.
The federal freeze on student loan payments temporarily eased employers’ sense of urgency by adding assistance programs, as did congressional pressure to cancel loans and the greater global need to support workers. affected by Covid, she said.
“This has caused a certain slowdown in the contribution or payment market for some of our clients,” she said. “There are so many other ways to spend money for the well-being of employees. ”
Employers with loan contribution programs typically allowed around $ 1,000 per employee per year, but some have increased that amount due to recent tax benefits, she said.
Some companies also let workers cash in their paid vacation balances and direct them to loan repayments, she noted.
[More: Sharing the student debt load]
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