Repayments made by employers and their employees can now be made pre-tax up to $5,250 annually, significantly increasing the power of contributions, and accelerating debt reduction
Congress has included key provisions of the Employer Participation in Repayment Act (H.R. 1043/S. 460) into a broad stimulus bill aimed at enhancing the US recovery from the COVID-19 epidemic.
The newly enacted statute will, among wider measures, offer tax relief for student loan repayment benefits programs. Employers are now able to make tax-free contributions of up to $5,250 per employee annually toward employee student debt without raising the employee’s gross taxable income. Under prior law, both employees and employers faced tax obligations when participating in student loan repayment benefits. Following the US government’s temporary halt on federal student loan interest charges, the passage of the bipartisan relief bill that was signed into law offers a path for employers to engage in long-term solutions for debt-strapped employees. Student debt has doubled in the last 10 years and affects workers across all demographic categories: One in three Millennials carry student debt, 45 million parents hold student debt for their adult children, and senior citizens are the fastest-growing segment of student debt holders.
Many employers do not offer student loan benefits because the tax treatment created a burden for their employees and companies. This stimulus bill removes barriers for companies to enhance their employee financial wellness, recruitment, and retention offerings with pre-tax student loan repayment, and empowers employees to pay down their debt balances faster.