Although the The CARES law was promulgated in March 2020, there is a lesser-known provision regarding student debt. Section 2206 of the CARES Act created a temporary tax-free provision for employer student loan assistance programs, according to Forbes.
Depending on the provision, an employer can make up to $ 5,250 in student loan payments for an employee within one year, either directly to the employee or to the student loan manager. This money is considered non-taxable, which means the employee does not have to pay income tax up to $ 5,250. In addition, the employer also benefits from an exclusion from payroll tax on this amount.
Initially scheduled to end in 2020, the program was extended until December 2025 under the consolidated finance law.
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According to the Society for Human Resource Management, only 8% of companies offered to pay off student loan debt before the pandemic, Business Insider reported. While it is not known how many companies have taken advantage of this incentive, some CEOs emphasize its importance.
In May, Business Insider spoke to Greg Poulin, the CEO of Goodly who worked with Congress to make the benefit tax-free. âThe arguments for employer sponsored student loan repayment programs are straightforward,â Poulin said. âSix in ten jobs now require post-secondary education beyond high school; Yet, due to soaring costs of higher education, a college degree remains incredibly out of reach for millions of Americans without the help of student loans.
More and more companies are taking steps to make education more affordable for employees. Walmart announced in July that it would commit to investing nearly $ 1 billion over the next five years in career-focused training and development, including pay 100% of tuition and books for associates through its Live Better U.
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Last updated: September 2, 2021
This article originally appeared on GOBankingRates.com: Your employer can pay $ 5,250 per year for your student loans tax-free until 2025