PHOENIX, Jan. 13, 2021 /PRNewswire/ -- With the Consolidated Appropriations Act, 2021 signed into law on Dec. 27, a key benefit for employers and employees paying down educational debt with student loan repayment assistance programs has been extended.
The provision of the CARES Act that expanded Section 127 of the Internal Revenue Code to cover employer contributions to student loan repayment on a tax-free basis was due to expire on Jan. 1, 2021. However, the provision has been extended for five more years, granting employers and employees tax advantages for student loan repayment assistance until Jan. 1, 2026.
Specifically, the provision allows employers to contribute to employee student loan repayment without the employer contributions being taxed. Employers can contribute up to $5,250 as a tax-deductible business expense, and employer contributions are excluded from employees' personal income tax responsibility.
To take advantage of this new tax benefit, employers can utilize a service like the Gift of College At-Work platform, which streamlines the process for employees to contribute to student loan accounts via payroll deduction and for employers to match or contribute to these accounts as well. The platform works for employee and employer contributions to 529 college savings and ABLE accounts as well. Adding this kind of high-demand benefit can also make employers more appealing to high-caliber industry talent—financial wellness benefits are among the top benefits requested by many employees and recent studies show 86% of employees would commit to an employer for five years in exchange of help with their student loans.
"Employers can play a critical role in solving one of the most challenging economic crises of our time—student loan debt," says Wayne Weber, founder and CEO of Gift of College. "Repayment assistance is a win for the millions of Americans carrying student loan debt and a win for employers who can receive valuable tax benefits in the process."