Student Loan Repayment For Human Resources Professionals: Navigating Debt In Hr Careers

Student Loan Repayment For Human Resources Professionals: Navigating Debt In Hr Careers – If you’re looking for new employee benefits, consider paying off student loans. The benefit itself is not new, but it received a tax break in 2020 thanks to the CARES Act and the Consolidated Appropriations Act.

The result? The upcoming employee benefits will affect companies across the country. What you need to know about student loan repayment programs.

Student Loan Repayment For Human Resources Professionals: Navigating Debt In Hr Careers

The US is breaking records when it comes to college — student debt, that is. With a student loan balance of $1.73 million, government discussions about reducing student debt are commonplace.

Student Loan Debt Elimination

The government has made it easier for employers to pay off student loans tax-free. If you haven’t heard of CARES Act self-pay loans, you’re not alone—it’s not a trivial tax relief measure.

Want to better attract talent? Would you suggest paying off student loans instead of getting a raise? Whatever the reason, read on to find answers to your questions about loan repayment assistance programs.

Employer student loan assistance is a benefit provided to an employee where the employer pays some or all of the employee’s loan. Employers can make payments (principal or interest) directly to the employee or student loan provider.

Until March 2020, student loan repayments were taxable, regardless of the amount. Both were replaced by the Coronavirus Response, Emergency Relief, and Economic Security (CARES) Act.

The Pros And Cons Of Student Loans

In addition to creating a wage protection and workforce retention program, the CARES Act made student loan payments from employers tax-free until the end of 2020. In December 2020, the Consolidated Finance Act extended the tax-free program through December 2025.

Bottom line: Employers can pay off student loans tax-free (up to the IRS limit) until December 31, 2025, unless extended.

Education grants fall under Section 127 of the Revenue Act. While student loan repayment is a relatively new tax-free benefit, tuition assistance has been around for a long time.

So what is the difference between student loan repayment and tuition assistance? As it turns out, there is no difference at all. The government has expanded the cost of education support to include student loan repayments.

Student Loan Debt Statistics In 2023

Key point: Paying off student loans is an eligible cost for student aid until the end of 2025.

You can give each employee up to $5,250 a year to pay off student loans. Do not include this amount in the employee’s income.

Note that $5,250 is tax-deductible, which is the general limit for repaying loans and other types of educational assistance under Section 127 of the Internal Revenue Code.

Include any amount you paid the employee in excess of $5,250 in wages (for example, on a W-2 form). Amounts above the limit are not taxed.

Recruitment And Retention Programs Arkansas Department Of Health

In 2019, only 8% of companies offered this benefit to employees. But since 2020 – 2025 (and possibly beyond) student loan payments are a tax-free benefit, the number has increased. In 2021, 17% of companies offered it, and 31% planned to offer it in the future.

Aetna, Estee Lauder, Fidelity Investments, and Staples are just a few companies that pay off student loans for their employees.

Bottom Line: Now that the owner’s participation in the return policy is not taxed, many companies are starting to offer this benefit.

An employee loan is eligible if they have received a loan to pay for school expenses:

Human Capital Definition: Types, Examples, And Relationship To The Economy

You can’t make tax-free student loan payments to employees for loans from family or a qualifying employer.

Having your employer pay off your student loans can seem like a windfall. After all, you don’t directly pay your employees’ other expenses, such as mortgages or car loans. But unlike your other employer obligations, student loan repayment is a tax-free employer benefit.

One in eight people in the US has student debt. Due to the large loan amount and high interest rates, student loans can make it difficult for employees to pay off other debt.

And if you can’t afford to raise employee wages, you can add tax-free benefits like paying off student loans.

Student Loan Payment Pause Benefits High Income Households The Most

Because student loan payments are tax-free until 2025, you won’t have to worry about paying Social Security or Medicare taxes on up to $5,250.

Bottom Line: Offering your employees to help pay off student loan payments is a tax-free way to increase your employee benefits.

The IRS has established rules for the educational assistance program for tax purposes. To set up a student loan repayment program, you’ll need:

Bottom line: If you want your program to qualify, follow the IRS guidelines for setting up educational assistance programs.

Biden Has A Plan B For Student Loan Forgiveness. The Courts Could Kill It, Too.

Start free paid setup and enjoy expert support. Try our paid program with a free, no-obligation 30-day trial. A lot has changed since March 2020, when the administration and Congress stopped paying most federal student loans. The national unemployment rate rose to 14.7 percent in April 2020, but has fallen significantly and remained below 4 percent since December 2021. The figure is now on track to rise from an average of 1.2 percent in 2020 to 9.1 percent in June 2022, the largest increase yet. More than 40 years. .

However, after nine extensions, student loan repayments are $5 billion per month. The Biden administration also sought to completely end repayment by forgiving hundreds of billions of dollars in federal student loans. Whether the forgiveness program is legal and how many millions of Americans will have to pay off their student loans in full is now before the US Supreme Court. The judge will hear the case on February 28.

These two strategies may be related in court, but they have very different overall effects. While the White House said about 90 percent of the aid provided under the amnesty plan went to families with incomes below $75,000, the wage breaks provided more than 65 percent of aid to families above $75,000. In fact, the top 20 percent of families receive nearly 30 percent of aid, but only 16 percent of families with federal student debt.

We look at student loan balances, wages, and income to determine the impact of the wage reduction program on low- and high-income Americans. Our analysis shows that a blanket moratorium on federal student loan repayments would not benefit the wealthy. The continuation of the wage break without benefits will result in higher costs for taxpayers.

How To Ask Your Employer To Fund Your Education

However, in the absence of wage-earning incentives, about 12 percent of low- and moderate-income households have a higher-than-average wage-to-income ratio for more student debt. If the promise of repayment and debt forgiveness in early 2023 ends with a negative decision by the Supreme Court, these borrowers could face bad financial results.

Relying on payment breaks may have made other forms of relief for the most vulnerable borrowers less popular, including payment plans and low-income benefits under the Fresh Start program. However, these strict methods are the best way to help borrowers who need public assistance the most. Encouraging families to pursue these options while the moratorium continues is an important safeguard for borrowers’ financial health.

State and private organizations have provided cost estimates for paying off educational loans. Developing these estimates requires determining the impact of the wage freeze on the federal budget, along with other economic indicators.

The government has found ways to record the break in billing as a “loan modification,” the price of forbearance not extra interest. The United States Department of Education estimates these costs at $41.9 billion for fiscal year 2020 and $53.1 billion for fiscal year 2021. In FY 2020 and FY 2021, the amount of unallocated spending for student loan delinquencies is $98.4 billion. The Congressional Budget Office estimates the cost of the suspension of payments from March 2020 to May 2022 at $112.8 billion. A subsequent letter from the office estimated that an additional $20 billion would be needed for an additional 4 months of aid between August 2022 and December 2022. .

Student Loan Pause Could Cost $275 Billion

In July 2022, the Public Accounts Office analyzed Department of Education data and found that emergency aid spending totaled $102 billion between March 2020 and April 2022. This analysis measures only the costs directly associated with the loan program, excluding extensions beyond August 2022, and can estimate the total cost of the wage break.

Private sector analysts also looked at factors beyond the direct costs of lost interest payments. In August 2022, the Federal Budget Committee (CRFB), a private think tank focused on fiscal policy, estimated the total cost of the holiday by the end of 2022 at $155 billion. With the extension announced in November, the organization set the cost of extending the payment freeze until August 2023 to create a base price of $195 billion. The majority