Companies Are Now Getting a Tax Break to Help Employees Pay Down Student Loans During Coronavirus
Companies have a new incentive to help their employees pay down their student debt.
The incentive—a new tax break—is thanks to a less-highlighted provision in the CARES Act, which also temporarily pauses payments and interest on most federal student loans as part of the government’s efforts to ease the financial chaos caused by the coronavirus.
Employers can now pay up to $5,250 toward an employee’s student loans tax-free through the end of the year. Traditionally, these payments are treated as wages, but until December 31, 2020, these payments are excluded from income and payroll taxes – benefitting both the employer and those receiving the repayment assistance.
Scott Thompson, who runs a company that manages these programs, says he has no doubt this change will accelerate adoption of loan repayment assistance programs by employers, despite the economic impacts of COVID-19.
