Although the CARES Act was signed into law in March 2020, there’s a lesser-known provision regarding student loan debt. Section 2206 of the CARES Act created a temporary tax-free provision for employer student loan assistance programs, according to Forbes.
According to the provision, an employer can make up to $5,250 in student loan payments for an employee within a year either directly to the employee or the student loan servicer. This money is considered tax-free, meaning that the employee doesn’t have to pay income taxes on up to $5,250. Additionally, the employer also receives a payroll tax exclusion on that amount.
Originally intended to end in 2020, the program was extended through December 2025 under the Consolidated Appropriations Act.
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According to the Society for Human Resource Management, only 8% of companies offered to repay student loan debt prior to the pandemic, Business Insider reported. While it’s unclear how many companies have taken advantage of this incentive, some CEOs are stressing its importance.
In May, Business Insider spoke with Greg Poulin, the CEO of Goodly who worked with Congress to make the benefit tax-free. “The case for employer-sponsored student loan repayment programs is simple,” Poulin said. “Six out of ten jobs now require postsecondary education beyond high school; yet, due to the soaring cost of higher education, a college degree remains tantalizingly out of reach for millions of Americans without the help of student loans.”
More companies are taking action to make education more affordable for employees. Walmart announced in July that it will commit to investing nearly $1 billion over the next five years in career-driven training and development, including paying 100% of college tuition and books for associates through its Live Better U education program.
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Last updated: September 2, 2021
This article originally appeared on GOBankingRates.com: Your Employer Can Pay $5,250 Annually Towards Your Student Loans Tax-Free Until 2025