There are almost 45 million Americans with student loan debt. On average, they owe about $36,000 each. Making those payments isn’t fun when there isn’t a pandemic. But, there was a tiny provision in the CARES Act passed in March, which might help you out.
“You can, in a sense, directly pay part of that student debt, $5,200 a year. Pay down the student debt, and that does not count as income to the employee,” said U.S. Sen. Mark Warner, (D) Virginia, who helped get the provision in.
Companies can make tax deductible payments of $5,250 towards employees' student debt. That payment is tax deductible for companies and employees don’t pay any taxes on that money.
Companies have always had this option to pay for employees going to school.
“I thought, well that works for getting additional training, why not try and provide that same kind of tax benefit for an employee in terms of paying down student debt,” said Sen. Warner.
The problem, that benefit was going to expire at the end of 2020. But in the latest stimulus bill passed, it was extended.
“Now in the new stimulus package, we’ve got this extended for additional five years. Really gets the chance to see if there will be a great deal of take up,” said Sen. Warner.
That means if you’ve got student loans, you could have your company pay off more than five grand a year, for the next five years. So how do you get started?
“First step would be to talk to HR, have them find out if they have some kind of something set up and if they don’t, then maybe that employer can maybe incorporate that into their upcoming benefits,” said Meagan Landress, a financial coach who specializes in student debt.
She says people should try and take advantage of this provision, but it’s not as simple as your company cutting you a check.
“The employer has to have some kind of educational assistance program in place. It can’t be something where they just give their employee as a bonus and it’s going to be able to take advantage of this, they have to have a structured program already in place,” said Landress.
So, talk to your HR representative or manager and find out if the company has a program or is interested in starting one. Then, start getting some of that student debt paid off.