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Coronavirus relief bill makes it easier for companies to pay down workers’ student loans

  • The latest stimulus package allows employers to make tax-free contributions of up to $5,250 a year to their employees' education debt.
  • The provision will expire in five years, although experts say it's likely to become permanent.
  • Each year, 70% of college graduates start off their lives in the red, and the average balance has climbed to $30,000, from $10,000 in the early 1990s. The typical monthly student loan payment is $400. 

The government's stimulus response to the pandemic may accelerate the trend of companies offering student loan assistance as a benefit.Mark Chilton | iStock | Getty Images

Student loan assistance, which started as a niche offering by a handful of companies, was already finding its way into the mainstream menu of workplace benefits before Covid hit.

The pandemic may only accelerate the trend.

Prior to the crisis, around 1 in 10 employers offered a student loan benefit, according to a 2019 survey by The Society for Human Resource Management. The share of companies that would do so could rise to 1 in 3, the organization found, if the government allowed them to avoid taxes on the payments.

In the $2.2 trillion federal CARES Act passed in March, it did just that. Although the tax-incentive was set to expire at the end of 2020, the latest relief package extends the provision for another five years. And experts say it's likely to become permanent.

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Many workers could use the assistance.

Each year, 70% of college graduates start off their lives in the red, and the average balance has climbed to $30,000, from $10,000 in the early 1990s. The typical monthly student loan payment is $400. 

Here are the details of the benefit and what the new rules mean.

How much can my boss pay toward my student loans?

Under the new provision, employers may make tax-free contributions of up to $5,250 a year to their employees' education debt. The payments are not included in the employees' taxable income.

How long will the benefit last?

Until at least Dec. 31, 2025.

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