Frequently, I see glossy ads in HR magazines about student loan repayment services and wonder if this Student Loan Repayment Benefit is truly a benefit or the equivalent of pet insurance. discovered modifications to the benefit structure which include pre-tax dollars to students with no out-of-pocket costs to the employer. Ready to be a hero to your employees? Here’s a little history about this benefit, what has changed, and how it’s a win for you and your employees:
Before the many COVID relief bills, businesses could choose to repay the student loan debt of their employees but it had to be counted as income. Since there are so many students graduating with high debt, this benefit could give a company a competitive advantage but it would require an additional outlay of cash.
However, one large company got around this by getting special IRS permission to add money to an employee 401K to match what an employee pays in student loans. It was clever to leverage the tax code in a way that benefits the employee, and the business still gets the positive karma win. But, there’s more.
Following Covid, in one of the latest relief bills, employers are now able pay an employees’ student loan servicer OR the employee directly, which means employees received pre-tax dollars to help them pay down student loans. And, this benefit will be available for employers and students through 2025.
Are you getting this? You can add more compensation to your employee’s income. So if you are currently paying $100 post-tax now, you can take that same compensation and give it to the employee pre-tax, which means employees now have extra buying power to pay down debt. What a great benefit and huge help to those straddled with student loan debts.
If you need more information or clarification about the Student Loan Repayment Benefit, contact your CPA or tax accountant. Leverage the tax code for a financial win and start feeling the employee love!
If you don’t have a CPA, or need a new connection, call me and I’ll be glad to share some contacts with you.
Tom
