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Among other things, the act provides broad relief for federal student loan borrowers. Section 127 provides that amounts paid or expenses incurred by employers under an educational assistance program for the educational assistance of employees are not included in the employee’s gross income, provided that the program satisfies the following requirements: The educational assistance program does not need to be funded. Reasonable notification of the availability and terms of the program must be provided to eligible employees. The $2.2 trillion Cares Act stimulus bill President Trump signed into law Friday includes required minimum distribution and early withdrawal penalty waivers directly related to 401ks, but it also includes a new student loan repayment benefit for employees that can help them start saving for retirement earlier.. Loan rehabilitation helps borrowers who've defaulted on their student loans get back on track. CARES Act Enables Employers to Assist with Student Loan Repayments. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, employers can now make nontaxable payments of up to $5,250 to employees as student loan repayment assistance, but only if the payments are made by December 31, 2020, under an educational assistance program that meets the requirements of Internal Revenue Code (Code) Section 127. "I have so many borrowers that are just so anxious about it they say, 'Well, I'm going to pay anyway,' " says Mayotte. The CARES Act Addresses Student Loans On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was passed to ease some of the hardships that have resulted from the pandemic. This law also waives student loan interest on qualifying federal student loans through September 30, 2020. Hidden within the CARES Act was this gem: employers can pay up to $5,250 to employees as student loan repayment assistance and it will not be taxable income to the employee. Excludes employer student loan repayments from taxable income of up to $5,250 for 2020. To listen to this episode, play the audio at the top of the page or find it here. A: Check what kind of loans you have. This story comes from Life Kit, NPR's podcast with tools to help you get it together. There's economic hardship deferment.". Your email address will not be published. Here's Some Advice For Families Stretching Their Budgets, Graduating In A Pandemic: Advice For The Anxious Post-College Job Search. The Coronavirus Aid, Relief, and Economic Security Act or, CARES Act, was passed by Congress and signed by President Donald Trump on March 27th, 2020. Under the CARES Act, payments on federal student loans — including direct loans, Perkins loans and Federal Family Education Loans owned by the … You need to confirm that you have federally held federal loans. If you're not already a part of loan rehabilitation, Mayotte says to call your lender to sign up. Section 2206 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, expands the definition of educational assistance described in section 2 of Pub. With one exception — student loans. A: If you're enrolled in Public Service Loan Forgiveness and continue to work full time for a qualified employer, take advantage of the CARES Act and do not make payments, at least until after Sept. 30. Many student loan borrowers can get a break right now. Even though those loans are a part of a federal program, some of them are held by commercial banks, not the federal government. The Coronavirus Aid Relief and Economic Security Act (the “CARES Act”), signed into law on March 27, 2020, provides employers with a new mechanism to assist their employees with repayment of student loans. The CARES Act allows employers to contribute up to $5,250 tax-free annually to their employees’ student loans until December 31, 2020. Here’s one not many people are talking about: tax-deductible, employer-paid student loan payments. Part of the CARES Act includes automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020. Accordingly, maximum employer student loan payments are limited to the extent that the employer makes payments for other qualified expenses under Section 127 such as tuition, fees, books, and equipment for employee education. Student loans come in all different shapes and sizes. Student loans can be a burden, and the current coronavirus pandemic is not making it any easier. The CARES Act, an economic stimulus bill signed by the president on March 27, 2020 (H.R. Welcome to the Snell & Wilmer Benefits Blog. Employers who help repay employee student loans take a big step in forming lasting trust and partnership with valued staff. Popular. Employers may provide each employer with up to $5,250 a year in combined tuition and textbook assistance and student loan repayment assistance, tax-free. No more than 5% of amounts paid by the employer for educational assistance during the year can be provided for individuals who own more than 5% of the stock or capital profits interest in the employer. On Aug. 21, Secretary DeVos fulfilled President Trump's Aug. 8 Memorandum on emergency federals student loan relief by extending the CARES Act borrower benefits until December 31, 2020. We invite you to contact the authors with your thoughts or questions. Many private lenders are offering some automatic relief, while others are offering their typical option of forbearance, which allows borrowers to postpone payments, but interest usually continues to accrue. Congress initiated this relief in … This provision allows employers to pay up to $5,250 of an employee's student loan debt on a tax-free basis. It's the Coronavirus Aid, Relief, and Economic Security Act, which was passed by Congress and has supplied $2 trillion of relief. That's where it gets complicated, says Mayotte. "I have never seen them do anything like this before," Mayotte says. Confusing. The program must benefit employees who qualify under a classification set up by the employer that is not discriminatory in favor of highly compensated employees. "This is a gift to those borrowers in that situation.". What the CARES Act does for student loan borrowers. Federal student loans that are owned by the U.S. Department of Education are covered under the CARES Act. In Case You Missed It … Recent Posts From the SW Benefits Update, Two Leave-Sharing Program Options for Employers During the COVID-19 Pandemic. Hidden within the CARES Act was this gem: employers can pay up to $5,250 to employees as student loan repayment assistance and it will not be taxable income to the employee. Interest and Payment Suspensions Are Automatic. For more Life Kit, sign up for our weekly newsletter. Most provisions apply only to Direct Loans and Federal Family Education Loans (FFEL loans) currently owned by the U.S. Department of Education (Department). The program cannot provide eligible employees with a choice between educational assistance and other remuneration includable in gross income. The Coronavirus Aid Relief and Economic Security Act (the “CARES Act”), signed into law on March 27, 2020, provides employers with a new mechanism to assist their employees with repayment of student loans. The program must be a separate written plan of the employer for the exclusive benefit of its employees to provide such employees with educational assistance. Mayotte suggests putting the money that would have gone to your loan into building up an emergency fund. Notably, Section 127 permits payments for student loans incurred by the employee, not the employee’s family. Prior to the CARES Act, any money received toward student loans counted as income for the employee. Many employers are seeking to assist their employees in the wake of the COVID-19 pandemic, so now might be a good time to consider taking advantage of this temporary opportunity to assist with student loan repayments. Before January 1, 2021, employers can make contributions toward their employees’ student loans on a tax-free basis under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Perkins loans held by an institution or school are also not eligible. Mayotte says that those borrowers who qualify will receive a waiver of their payments through Sept. 30, 2020, and 0% interest and that "they don't have to do a darn thing to get those benefits.". The CARES Act was enacted on March 27, 2020 with the goal of … The CARES Act suspends payments on all federal student loans held by the U.S. Department of Education for six months. But how do you know if you qualify? The best way to confirm? What the CARES Act Means for Student Loans. One option to consider instead of forbearance is an income-driven repayment plan. Section 2206 of the CARES Act amends Section 127 of the Internal Revenue Code (the “Code”) to allow … The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed Congress last week to address many of the issues created by the coronavirus. ", If you want to double-check that you qualify for this PSLF waiver under the CARES Act, visit StudentAid.gov and click on where it says, "Coronavirus and Forbearance Information for Students, Borrowers, and Parents.". Mayotte says to look out for a few key tells from any phone call or email you receive about loans. How do you know for sure that you qualify for this type of relief? Best Mortgage Lenders 2020. That will help lower your monthly payment, sometimes to as low as $0. Employers can ALSO deduct the amount and not pay federal payroll taxes on the payments. To qualify, you typically need to make nine consecutive on-time payments. Here’s one not many people are talking about: tax-deductible, employer-paid student loan payments. Those include PLUS loans and Stafford loans. The stimulus package includes provisions to help most student loan borrowers weather the economic storm caused by the COVID-19 pandemic. Federal loans that don't qualify for CARES Act relief are under the Federal Family Education Loan Program. The CARES Act, the sweeping stimulus legislation enacted in March, includes relief for student loan borrowers. "Private loans, unfortunately, there's no sort of blanket guidance other than to call your loan holder if you're financially struggling and see what they're offering," says Mayotte. Enter your email address to receive notifications of new posts by email. This includes Direct Stafford Loans, Direct PLUS Loans for parents and graduate students, and Direct Consolidation Loans. Notably, the CARES Act does not provide an exception to this rule, so employers might consider adopting a written educational assistance plan or amending their existing written educational assistance plan to incorporate this student loan payment benefit before taking advantage of Section 2206. 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