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). How do you know for sure that you qualify for this type of relief? Among other things, the act provides broad relief for federal student loan borrowers. 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. Popular. One option to consider instead of forbearance is an income-driven repayment plan. There's economic hardship deferment.". 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. Confusing. This provision allows employers to pay up to $5,250 of an employee's student loan debt on a tax-free basis. 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. Those include PLUS loans and Stafford loans. The CARES Act benefits for federal student loans have been extended to January 31, 2021. Reasonable notification of the availability and terms of the program must be provided to eligible employees. Many student loan borrowers can get a break right now. President … Employers can ALSO deduct the amount and not pay federal payroll taxes on the payments. The stimulus package includes provisions to help most student loan borrowers weather the economic storm caused by the COVID-19 pandemic. 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. CARES Act Enables Employers to Assist with Student Loan Repayments. Most federal student loan borrowers don't have to do anything to qualify for CARES Act relief. That means forbearance can end up costing a borrower more in the long run. To qualify, you typically need to make nine consecutive on-time payments. But how do you know if you qualify? If you're not already a part of loan rehabilitation, Mayotte says to call your lender to sign up. 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. With unemployment at record highs, Americans are struggling to pay for necessities such as rent or groceries. 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. Federal loans that don't qualify for CARES Act relief are under the Federal Family Education Loan Program. The program cannot provide eligible employees with a choice between educational assistance and other remuneration includable in gross income. That's where it gets complicated, says Mayotte. Scammers always come crawling out of the gutters during times of crisis. 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. 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 CARES Act does expand on the Trump Administration’s prior proposal to freeze interest on federal student loans but stops short of the Democratic proposal to cancel at least $10,000 in outstanding balances for all holders of federal loans, regardless of enrollment status. Excludes employer student loan repayments from taxable income of up to $5,250 for 2020. You need to confirm that you have federally held federal loans. It's the Coronavirus Aid, Relief, and Economic Security Act, which was passed by Congress and has supplied $2 trillion of relief. That will help lower your monthly payment, sometimes to as low as $0. Employers who help repay employee student loans take a big step in forming lasting trust and partnership with valued staff. In addition, the interest on these federal student loans will automatically drop to zero percent between March 13, 2020 … 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. 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 … In March, borrowers were granted a reprieve on their loan payments, interest was set to 0% and collections of defaulted federal student loans stopped. Even though those loans are a part of a federal program, some of them are held by commercial banks, not the federal government. Have Federal Student Loans? This story comes from Life Kit, NPR's podcast with tools to help you get it together. Student loans can be a burden, and the current coronavirus pandemic is not making it any easier. 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. In Case You Missed It … Recent Posts From the SW Benefits Update, Two Leave-Sharing Program Options for Employers During the COVID-19 Pandemic. 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. Employers can make payments either directly to the employee or to a lender. Best Mortgage Lenders 2020. 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 – … Life Kit and WNYC Studios' Death, Sex & Money teamed up to bring you answers. "I have so many borrowers that are just so anxious about it they say, 'Well, I'm going to pay anyway,' " says Mayotte. 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. To listen to this episode, play the audio at the top of the page or find it here. This includes Direct Stafford Loans, Direct PLUS Loans for parents and graduate students, and Direct Consolidation Loans. Of course, there is the fine print. What about private loans? We will be posting about current employee benefits and executive compensation topics and issues. So, if your loans are eligible, you can stop paying your student loans through September 30, 2020. The program must be a separate written plan of the employer for the exclusive benefit of its employees to provide such employees with educational assistance. 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. The CARES Act was enacted on March 27, 2020 with the goal of … 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. The CARES Act also amends Section 127 of the tax code to incorporate provisions of The Employer Participation in Repayment Act. "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. Perkins loans held by an institution or school are also not eligible. ... Student Loans and the CARES Act: Here's How Coronavirus Relief Will Actually Work This bill allotted $2.2 trillion to provide fast and direct economic aid to the American people … 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. 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. Under the CARES Act, payments on federal student loans — including direct loans, Perkins loans and Federal Family Education Loans owned by the … Loan rehabilitation helps borrowers who've defaulted on their student loans get back on track. 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. First, the good news. Welcome to the Snell & Wilmer Benefits Blog. With one exception — student loans. ", 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.". The CARES Act, the sweeping stimulus legislation enacted in March, includes relief for student loan borrowers. Here's Some Advice For Families Stretching Their Budgets, Graduating In A Pandemic: Advice For The Anxious Post-College Job Search. The CARES Act includes several provisions that apply to certain loans owed by some federal student loan borrowers. 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. 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. If you owe federal student loans, there are a few ways the CARES Act can help make them … Enter your email address to receive notifications of new posts by email. "This is a gift to those borrowers in that situation.". Federal student loans that are owned by the U.S. Department of Education are covered under the CARES Act. Here’s one not many people are talking about: tax-deductible, employer-paid student loan payments. A: If your federal loans are in default, look into entering a loan rehabilitation program. For more Life Kit, sign up for our weekly newsletter. 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 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. There are other options, says Mayotte. The CARES Act, an economic stimulus bill signed by the president on March 27, 2020 (H.R. 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. Your email address will not be published. Notably, Section 127 permits payments for student loans incurred by the employee, not the employee’s family. What the CARES Act does for student loan borrowers. If you have qualifying federal student loans, you … 15-B to include certain employer payments of student loans paid after March 27, 2020, and before January 1, 2021. Mayotte suggests putting the money that would have gone to your loan into building up an emergency fund. People with federally held federal loans are eligible for CARES Act relief. Additionally, Section 127 permits a maximum exclusion of $5,250 for all employer payments and expenses under educational assistance programs. Congress initiated this relief in … The Department continues to update ed.gov/coronavirus with information on COVID-19 for students, parents, educators, and local leaders. Student loans come in all different shapes and sizes. We invite you to contact the authors with your thoughts or questions. "I have never seen them do anything like this before," Mayotte says. The best way to confirm? Part of the CARES Act includes automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020. 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 program must benefit employees who qualify under a classification set up by the employer that is not discriminatory in favor of highly compensated employees. Interest and Payment Suspensions Are Automatic. What the CARES Act Means for Student Loans. A: If you have private student loans or otherwise don't qualify for CARES Act relief, reach out to your servicer. "There's unemployment deferment. Prior to the CARES Act, any money received toward student loans counted as income for the employee. "Anybody that tries to create a sense of urgency, like, 'You have to do X, or you're not going to get the waiver,' or 'You have to pay this fee' ... that is almost certainly a scam," she says. Mayotte says, "Ask your servicer if you have a federally held federal loan, or ... log on to studentaid.gov and look at the loan detail and see if it lists the Department of Education as the lender.". 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. ", 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? 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. Part of the CARES Act includes automatic suspension of principal and interest payments on federally held student loans through Sept. 30, 2020. "Don't pay. Enter the CARES Act. Section 2206 of the CARES Act amends Section 127 of the Internal Revenue Code (the “Code”) to allow … Mortgages. 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. Required fields are marked *, You may use these HTML tags and attributes:
. Mayotte says to look out for a few key tells from any phone call or email you receive about loans. A: Check what kind of loans you have. The CARES Act suspends payments on all federal student loans held by the U.S. Department of Education for six months. 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 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 $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.. The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed Congress last week to address many of the issues created by the coronavirus. 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.". 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. "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. 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 ] . Here's what you need to know about what the government and private lenders are doing. Most provisions apply only to Direct Loans and Federal Family Education Loans (FFEL loans) currently owned by the U.S. Department of Education (Department).