*New York (CNN) — As borrowers prepare to resume paying their federal student loans in the coming weeks, the IRS is reminding employers that they can help by offering workers up to $5,250 tax-free as part of their educational assistance benefits.
That $5,250 is the federal cap on the amount of tax-free money that employers may offer to help defray employees’ qualified costs for their own education, including tuition and fees. (Reimbursements above that threshold are treated as taxable income to the employee.)
While companies have been allowed to offer such benefits for years, it’s only since March 2020 that lawmakers have let employers offer those tax-free subsidies to offset the payment of principal and interest on their workers’ federal and private student loans.
But it’s a limited-time offer: The provision is set to expire on December 31, 2025.
Push to raise public awareness of the benefit
Employers may craft their educational assistance plans to cover what they choose from the expenses deemed “qualified” by these federal guidelines.
It appears, however, that not many have chosen to include student loan debt since those expenses were first allowed in 2020.
In response to the Society of Human Resource Management’s 2023 employer benefits survey, only 8% of organizations said they offer student loan benefits to employees, a percentage that hasn’t changed for five years. By contrast, 48% said they offer tuition assistance.
The reasons for that discrepancy are unclear. But lawmakers who advocated for tax-advantaged employer benefits to help with student loan payments are concerned there hasn’t been enough public awareness of it. And they have asked the IRS to step up its outreach.
In announcing a September 14 free webinar to educate employers about the provision, IRS Commissioner Danny Werfel said, “The IRS wants to make sure employers don’t overlook this option that can help businesses attract and retain workers.”
The value of the benefit to those with student loans
Paying down student loans can take a real bite out of your monthly budget.
For adults working full-time and carrying that debt, reimbursements of up to $5,250 a year — or just under $438 a month — can be a boon to their bottom line. Even getting just $100 or $200 a month to offset payments can make a difference.
That may be of particular interest now that the yearslong pause in payments on federal student loans is expiring. The Federal Reserve has noted that those payments alone were typically between $200 and $299 a month before the payment pause went into effect in 2020.
But for anyone who also has to pay off private student loans, the amount they shell out every month is likely much higher.
— CNN’s Katie Lobosco contributed to this report.
OTHER NEWS ON EURWEB: Charlene Crowell: Regulatory Rollback on Student Loans Takes Away Borrower Protections
The-CNN-Wire
™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.
We Publish News 24/7. Don’t Miss A Story. Click HERE to SUBSCRIBE to Our Newsletter Now!
