. First, the good news. So, if your loans are eligible, you can stop paying your student loans through September 30, 2020. The CARES Act suspends payments on all federal student loans held by the U.S. Department of Education for six months. We will be posting about current employee benefits and executive compensation topics and issues. Employers can make payments either directly to the employee or to a lender. Employers can ALSO deduct the amount and not pay federal payroll taxes on the payments. Here’s one not many people are talking about: tax-deductible, employer-paid student loan payments. There are other options, says Mayotte. Loan rehabilitation helps borrowers who've defaulted on their student loans get back on track. Part of the CARES Act includes automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020. That will help lower your monthly payment, sometimes to as low as $0. The CARES Act includes several provisions that apply to certain loans owed by some federal student loan borrowers. 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.. Additionally, Section 127 permits a maximum exclusion of $5,250 for all employer payments and expenses under educational assistance programs. "I have never seen them do anything like this before," Mayotte says. With unemployment at record highs, Americans are struggling to pay for necessities such as rent or groceries. Part of the CARES Act includes automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020. 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. This story comes from Life Kit, NPR's podcast with tools to help you get it together. Confusing. It's the Coronavirus Aid, Relief, and Economic Security Act, which was passed by Congress and has supplied $2 trillion of relief. Most federal student loan borrowers don't have to do anything to qualify for CARES Act relief. But under the CARES Act, Mayotte notes, borrowers do not need to make those payments and those unmade payments will still count as on-time payments. 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. "I have so many borrowers that are just so anxious about it they say, 'Well, I'm going to pay anyway,' " says Mayotte. That means you’d normally pay taxes on the amount, and if you had federal student loans in an income-based repayment plan, your monthly payment could increase due to the resulting higher income. 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 allows employers to contribute up to $5,250 tax-free annually to their employees’ student loans until December 31, 2020. 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. "Don't pay. "There's unemployment deferment. Here’s one not many people are talking about: tax-deductible, employer-paid student loan payments. A: If you have private student loans or otherwise don't qualify for CARES Act relief, reach out to your servicer. That's where it gets complicated, says Mayotte. 748, § 3513), gives temporary relief to federal student loan borrowers in the form of (1) payment and interest accrual suspension and (2) consideration of suspended payments toward loan forgiveness The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed Congress last week to address many of the issues created by the coronavirus. Student debt repayment and the CARES Act: What to know Employers can now help their employees pay down student debt faster and save a significant amount of money on student loan interest. Section 2206 of the CARES Act amends Section 127 of the Internal Revenue Code (the “Code”) to allow employers to pay up to $5,250 toward qualified education loans as part of an educational assistance program as long as the payments are made before January 1, 2021. If you owe federal student loans, there are a few ways the CARES Act can help make them … Student loans can be a burden, and the current coronavirus pandemic is not making it any easier. Mayotte suggests putting the money that would have gone to your loan into building up an emergency fund. 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. Have Federal Student Loans? Enter the CARES Act. Of course, there is the fine print. 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. Popular. To qualify, you typically need to make nine consecutive on-time payments. Mayotte says to look out for a few key tells from any phone call or email you receive about loans. With one exception — student loans. Interest and Payment Suspensions Are Automatic. 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. Mortgages. The Department continues to update ed.gov/coronavirus with information on COVID-19 for students, parents, educators, and local leaders. Here's Some Advice For Families Stretching Their Budgets, Graduating In A Pandemic: Advice For The Anxious Post-College Job Search. Reasonable notification of the availability and terms of the program must be provided to eligible employees. "Anybody who runs across any of those, please, please, please take a minute and report them to the Federal Trade Commission, as well as your local attorney general's office. A: If your federal loans are in default, look into entering a loan rehabilitation program. But how do you know if you qualify? In March, borrowers were granted a reprieve on their loan payments, interest was set to 0% and collections of defaulted federal student loans stopped. The CARES Act also amends Section 127 of the tax code to incorporate provisions of The Employer Participation in Repayment Act. Federal loans that don't qualify for CARES Act relief are under the Federal Family Education Loan Program. 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. The CARES Act, the sweeping stimulus legislation enacted in March, includes relief for student loan borrowers. 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. In Case You Missed It … Recent Posts From the SW Benefits Update, Two Leave-Sharing Program Options for Employers During the COVID-19 Pandemic. Under the new law, no payments are required on federal student loans owned by the U.S. Department of Education between March 13, 2020 and December 31, 2020. The CARES Act, an economic stimulus bill signed by the president on March 27, 2020 (H.R. Employers who help repay employee student loans take a big step in forming lasting trust and partnership with valued staff. "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. President … The CARES Act also offers relief for most federal student loan borrowers (including those who have direct loans, Perkins loans and Federal Family Education Loans … How do you know for sure that you qualify for this type of relief? For more Life Kit, sign up for our weekly newsletter. To listen to this episode, play the audio at the top of the page or find it here. Many student loan borrowers can get a break right now. The CARES Act was enacted on March 27, 2020 with the goal of … This includes Direct Stafford Loans, Direct PLUS Loans for parents and graduate students, and Direct Consolidation Loans. 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. 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. Here's what you need to know about what the government and private lenders are doing. CARES Act Enables Employers to Assist with Student Loan Repayments. 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. The CARES Act provides pandemic relief for employers to help repay employee student loans through a one-time, temporary amendment to Section 127 of the IRS Code. 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. We invite you to contact the authors with your thoughts or questions. Perkins loans held by an institution or school are also not eligible. That means forbearance can end up costing a borrower more in the long run. The CARES Act Leaves Behind Millions of Student Loan Borrowers By Tariq Habash | March 27, 2020 Updated September 1, 2020: SBPC estimates that there are 6.35 million private student loan borrowers in the U.S. based on data from the Federal Reserve Bank of New York [ 1 ] and the Department of Education [ 2 ] . Life Kit and WNYC Studios' Death, Sex & Money teamed up to bring you answers. Those include PLUS loans and Stafford loans. This bill allotted $2.2 trillion to provide fast and direct economic aid to the American people … There's economic hardship deferment.". 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. The stimulus package includes provisions to help most student loan borrowers weather the economic storm caused by the COVID-19 pandemic. Excludes employer student loan repayments from taxable income of up to $5,250 for 2020. 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. One option to consider instead of forbearance is an income-driven repayment plan. Federal student loans that are owned by the U.S. Department of Education are covered under the CARES Act. 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. 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