The best way to confirm? What about private loans? That will help lower your monthly payment, sometimes to as low as $0. What the CARES Act Means for Student Loans. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains a temporary provision that provides tax-free status to employer-paid student loan repayment assistance programs (LRAPs). 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. With unemployment at record highs, Americans are struggling to pay for necessities such as rent or groceries. 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. 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. This provision allows employers to pay up to $5,250 of an employee's student loan debt on a tax-free basis. Welcome to the Snell & Wilmer Benefits Blog. Mortgages. Here's Some Advice For Families Stretching Their Budgets, Graduating In A Pandemic: Advice For The Anxious Post-College Job Search. 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. Confusing. Among other things, the act provides broad relief for federal student loan borrowers. 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. CARES Act Enables Employers to Assist with Student Loan Repayments. "Don't pay. So, if your loans are eligible, you can stop paying your student loans through September 30, 2020. A: If your federal loans are in default, look into entering a loan rehabilitation program. To qualify, you typically need to make nine consecutive on-time payments. This law also waives student loan interest on qualifying federal student loans through September 30, 2020. 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. In March, borrowers were granted a reprieve on their loan payments, interest was set to 0% and collections of defaulted federal student loans stopped. We invite you to contact the authors with your thoughts or questions. 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. First, the good news. Even though those loans are a part of a federal program, some of them are held by commercial banks, not the federal government. "I have never seen them do anything like this before," Mayotte says. The CARES Act, the sweeping stimulus legislation enacted in March, includes relief for student loan borrowers. Most federal student loan borrowers don't have to do anything to qualify for CARES Act relief. Under the CARES Act, payments on federal student loans — including direct loans, Perkins loans and Federal Family Education Loans owned by the … Section 2206 of the CARES Act amends Section 127 of the Internal Revenue Code (the “Code”) to allow … The CARES Act benefits for federal student loans have been extended to January 31, 2021. Here's what you need to know about what the government and private lenders are doing. Enter your email address to receive notifications of new posts by email. "There's unemployment deferment. Required fields are marked *, You may use these HTML tags and attributes:
. 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. ", automatic suspension of principal and interest payments on federally held student loans, What's Inside The Senate's $2 Trillion Coronavirus Aid Package, Coronavirus and Forbearance Information for Students, Borrowers, and Parents, Short on Cash? If you owe federal student loans, there are a few ways the CARES Act can help make them … Congress initiated this relief in … Most provisions apply only to Direct Loans and Federal Family Education Loans (FFEL loans) currently owned by the U.S. Department of Education (Department). 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 includes Direct Stafford Loans, Direct PLUS Loans for parents and graduate students, and Direct Consolidation Loans. In addition, the interest on these federal student loans will automatically drop to zero percent between March 13, 2020 … If you're not already a part of loan rehabilitation, Mayotte says to call your lender to sign up. 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. 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 can ALSO deduct the amount and not pay federal payroll taxes on the payments. The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, will help most federal student loan borrowers by temporarily pausing payments – … Notably, Section 127 permits payments for student loans incurred by the employee, not the employee’s family. 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.". 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. The CARES Act, an economic stimulus bill signed by the president on March 27, 2020 (H.R. To listen to this episode, play the audio at the top of the page or find it here. Life Kit and WNYC Studios' Death, Sex & Money teamed up to bring you answers. It's the Coronavirus Aid, Relief, and Economic Security Act, which was passed by Congress and has supplied $2 trillion of relief. 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. As part of the $2 trillion CARES Act, people with federally held federal student loans are getting an automatic forbearance until the end of September. How do you know for sure that you qualify for this type of relief? Here’s one not many people are talking about: tax-deductible, employer-paid student loan payments. Anna Sale, host of Death, Sex & Money, sat down with Betsy Mayotte, who runs the Institute of Student Loan Advisors, to get the answers to common questions about student loan relief during the pandemic. What the CARES Act does for student loan borrowers. Student loans come in all different shapes and sizes. A: Check what kind of loans you have. ", 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.". We will be posting about current employee benefits and executive compensation topics and issues. You need to confirm that you have federally held federal loans. 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. Student loans can be a burden, and the current coronavirus pandemic is not making it any easier. 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. A: If you have private student loans or otherwise don't qualify for CARES Act relief, reach out to your servicer. 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 Of course, there is the fine print. Mayotte says to look out for a few key tells from any phone call or email you receive about loans. 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. Part of the CARES Act includes automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020. The CARES Act also amends Section 127 of the tax code to incorporate provisions of The Employer Participation in Repayment Act. That's where it gets complicated, says Mayotte. Enter the CARES Act. The CARES Act suspends payments on all federal student loans held by the U.S. Department of Education for six months. 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 … 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. Mayotte suggests putting the money that would have gone to your loan into building up an emergency fund. Here’s one not many people are talking about: tax-deductible, employer-paid student loan payments. The CARES Act allows employers to contribute up to $5,250 tax-free annually to their employees’ student loans until December 31, 2020. The stimulus package includes provisions to help most student loan borrowers weather the economic storm caused by the COVID-19 pandemic. For more Life Kit, sign up for our weekly newsletter. Perkins loans held by an institution or school are also not eligible. Your email address will not be published. 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. "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. You Missed it … Recent posts from the SW benefits update, Two Leave-Sharing program Options for employers the! You Missed it … Recent posts from the SW benefits update, Two Leave-Sharing program Options for employers the... Provide eligible employees with a choice between educational assistance and other remuneration includable in income. Consolidation loans 127 of the employer Participation in Repayment Act look into entering a loan rehabilitation program suspension principal! Reasonable notification of the gutters during times of crisis borrowers do n't qualify for CARES Act.! 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