Stimulus package provides tax relief for student loan benefits
The coronavirus stimulus package passed Friday contains temporary relief for employers that offer student loan benefits, perhaps helping to cushion the benefit’s stability during a tough pandemic economy.
The legislation approved this week includes a one-time tax break this year for annual employer contributions of up to $5,250 toward student loan debt for each employee.
Currently, employers can contribute up to $5,250 tax-free each year for tuition assistance, helping workers who are attending classes while on the job. But tax relief had not existed for employers who are helping pay off educational debt employees already have accrued—even though many industry insiders have been pushing for such relief for years. That changes with the passage of the stimulus package.
However, the student loan benefit tax relief is temporary: Without being renewed, it will expire Jan. 1, 2021.
Employers and benefit industry insiders hailed the decision, saying it’s a critical step in ensuring employers continue to help employees ease student debt burdens.
“With student loan debt topping nearly $1.6 trillion in the U.S., this is an issue that will carry on long after the COVID-19 crisis passes,” says Wayne Weber, CEO of Gift of College, a financial services firm that allows employers to contribute to college savings plans and student loan accounts via payroll. “We hope this provision is made permanent to support employers in their quest to provide much-needed relief to their employees who are struggling with student debt.”
Companies including Aetna, the Hartford, Estée Lauder, Staples, Sotheby’s, Trilogy Health Services and Unum have rolled out student loan benefits in the past few years as employers witnessed the effect student debt is wreaking on the workforce. Today, about 8% of employers offer a student debt benefit, up from 4% last year, according to the latest available data from the Society for Human Resource Management.
Although insiders were predicting the number of employers that offer student loan benefits to grow significantly, especially in a hot job market, a pandemic economy has the potential to nix those predictions and slow down nonessential benefit offerings as employers look to cut costs.
“Employers want to help their employees pay off their student debt, but the additional expenses that will accompany COVID-19 recovery will force them to make extremely difficult decisions about all of their benefit programs,” Sara VanWagoner, vice president of corporate growth for Edcor, an education benefits administration provider that processed roughly $250 million in tuition assistance payments last year. However, the tax relief may help prevent this, she notes.