New Stimulus Package Lets Your Employer Pay Your Student Loans Until 2025

New Stimulus Package Lets Your Employer Pay Your Student Loans Until 2025


Your boss can pay your student loans for longer than you may think.

Here’s what you need to know.

Student Loans

In many ways, the new stimulus package is a net loss for student loan borrowers who were hoping for student loan relief or student loan forgiveness. Congress dropped student loan relief from the new stimulus package, which means your federal student loan payments will resume on January 31, 2021, interest will start accruing and student loan debt collection will commence. However, there is one win for borrowers seeking student loan repayment from their employers. Here’s how it works:

Your employer pays off student loans

Many borrowers aren’t aware, but your employer can help pay your student loans. Under the Cares Act—the $2.2 trillion stimulus package that Congress passed in March—there is a tax incentive for employers to help their employees with student loan repayment. The Cares Act allows:

  • employers to make pre-tax payments of up to a maximum of $5,250 per employee between March 27, 2020 and December 31, 2020;
  • both federal student loans and private student loans to be eligible;
  • payments for principal or interest on a “qualified education loan”;
  • employers and employees to save on federal payroll taxes on qualifying payments; and
  • employees to save on federal income taxes.

This employer student loan relief was slated to expire on December 31, 2020. However, Congress has now extended this student loan relief through December 31, 2025 in the new stimulus bill. “This is a win for both graduates and employers,” Sen. Mark Warner (D-VA), who was the first to graduate from college in his family, said. “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.”

Last year, Warner and Sen. John Thune (R-SD) introduced bipartisan legislation, The Employer Participation in Repayment Act, to allow employers to contribute up to $5,250 tax-free to their employees’ student loans.


Student loan relief: growing trend

The notion of employers, not the federal government, paying student loans on behalf of borrowers is an emerging trend in student loan repayment. Warner and Thune created their original legislation to help employees with their student loans and empower employers to use this student loan benefit to attract and retain top talent. This is a win-win for both employers and employees, and it’s an innovative, bipartisan way to envision student loan repayment. As some in Congress call for wide-scale student loan cancellation, employer student loan repayment is an alternative to save federal taxpayers money. Essentially, employers, rather than federal taxpayers, can play a more active role in wide-scale student loan repayment—and get federal tax breaks while helping their employees to become debt-free. By extending this student loan relief for five years, Congress is signaling—on a bipartisan basis—that shifting at least some student loan repayment “responsibility” to the private sector is a long-term trend that is not going away. The extension of this employer student loan repayment benefit also may relieve at least some pressure from President-elect Joe Biden. Members of Congress such as Sen. Elizabeth Warren (D-MA) want Biden to cancel student loans through an executive order. With this five year extension, and support from the private sector, Biden may have less incentive to cancel student loans through an executive order at least in the short-term.


How to get your employer to pay student loans

You may be wondering, “What’s the best way to get your employer to pay student loans?” It depends. This legislation does not mandate companies to pay off student loans. Rather, it’s a student loan benefit that is optional for an employer. Check with your human resources department to learn if your employer offers this student loan repayment benefit.


Pay Off Student Loans

It’s possible that this employer benefit may only help with a small amount of your student loans. It’s also possible that your employer doesn’t offer this student loan benefit. With student loan payments resuming in January, it’s essential that you have a student loan plan. The good news is that you can still refinance your student loans and qualify for this employer benefit, including for federal and private student loans. Make sure you have a student loan repayment plan in place now. Here are 3 ways to pay off student loans, all of which have no fees:


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