The Monday-approved $900 billion stimulus package may not include an extension of existing student loan relief, but it doesn’t leave borrowers completely high and dry. Approved in both the House of Representatives and the Senate and currently awaiting President Donald Trump’s signature, the bipartisan package, the second-biggest in U.S. history, allows employers to help pay employees’ student loans through 2025.
The relief measure had initially been enacted under the March-approved CARES Act, which enacted a tax incentive for employers to help employees with student loan repayment. The CARES Act, and the new stimulus bill if approved by the president, allows employers to choose between tuition assistance and this student loan incentive, Forbes reports. It was initially slated to expire alongside numerous other relief measures on Dec. 31 of this year. Congress, however, extended the measure in the new stimulus bill through Dec. 21, 2025.
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“This is a win for both graduates and employers,” Sen. Mark Warner said of the extension. “By extending this provision, employers will have the ability to continue to recruit and retain a talented workforce while also helping working Americans manage their financial future through and after COVID-19.”
According to the provision, and as stated in the CARES Act, employers can make “tax-free payments of up to a maximum of $5,250 per employee between March 27, 2020 and December 31, 2020,” or 2025 if the new bill is approved. The repayment is eligible for both federal and private student loans, with payments eligible for principal or interest on a “qualified education loan.” The legislation allows for employers and employees to save on federal payroll taxes on qualifying payments and for employees to save on federal income taxes.
The legislation does not, however, mandate companies to pay off student loans, meaning your employer may not offer this benefit at this time. Forbes recommends student loan borrowers “check with your human resources department to learn if your employer offers this student loan repayment benefit.”
Along with this relief program, current student loan relief also includes a freeze on both federal student loan payments and the accrual of interest. The pause had also been enacted under the CARES Act. The president renewed the freeze through Jan. 31, 2021 via executive order. The Congress-approved $900 billion stimulus bill does not extend this relief, however, meaning loan repayments and interest accrual will resume after Jan. 31.
