Given the financial difficulties that many people face during the Covid-19 pandemic, the federal government offers student loan relief. Loan payments, interest and collections have been suspended on loans held by the Ministry of Education until September 30, 2021.
Employers are also stepping in to help employees repay their student loans. This is good news, as a recent study by The Institute for Access and Success in Colleges found that 62% of college seniors graduated with student debt in 2019, adding to the pool of 44.7 million people in debt at college.
the Society for Human Resources Management also found that 8% of companies offered student loan repayment benefits to employees in 2019, up from 4% in their last survey. That number is expected to continue to soar thanks to a provision from the latest coronavirus stimulus package.
If you need additional help with your student debt, you may want to consider refinancing your private student loans. You can use Credible for compare the student loan refinancing rates of several lenders at the same time without affecting your credit score.
How can an employer repay an employee’s student loan?
the CARES Law has brought a wide range of benefits, including a tax incentive for employers who provide education assistance and help their employees pay off student loans. The law allows employers to make tax-free contributions of up to $ 5,250 per year for employee tuition or student loan repayments.
The student loan provision benefits both employers and employees by allowing employers to avoid payroll taxes and saving employees money on federal income tax. Plus, employer contributions can be used towards the principal loan balance or interest, allowing you to pay off student loans faster and save on long-term interest.
If you’re struggling with a private student loan, a An online tool like Credible can be helpful in comparing student loan refinancing rates from several lenders.
How long will this benefit last?
The CARES Act originally allowed employers to contribute to employee student loan payments between March 27, 2020 and December 31, 2020. But this is now extended until December 31, 2025 thanks to a student loan repayment assistance provision of the consolidated appropriation law adopted at the end of December 2020.
As student debt cancellation and moves on to student loan forgiveness still debated, this five-year extension signals a bipartisan desire to reduce the burden of student debt and bring employers and the private sector to the forefront of the strategy.
Does this apply to federal or private student loans?
Under the CARES Act and the Consolidated Appropriations Act, employers are permitted to make tax-exempt payments on “qualifying student loans”. Eligible student loans are defined as loans taken out only to pay for higher education expenses. In other words, federal and private student loans are eligible, as long as you explicitly use them to pay for your college education.
This differs from the government guaranteed forbearance and interest-free period, which only applies to federal student loans.
If you have private loans and need extra help paying off student loans during the pandemic, check with your lender, as some private companies offer emergency forbearance or temporarily waive late fees. If you’re not happy with your lender’s options, head over to Credible and see if you can. get better financial aid or lower rates from other lenders.
Should I refinance my student loans?
Whether or not your employer is willing to help with your student loan payments, now is a great time to move forward with your student loan payments.
If you have federal student loans, you can take advantage of the next few months of interest-free forbearance by repaying your student loans aggressively or by saving and investing more. If you have private student loans, now is a great time to consider a student loan refinancing.
Refinancing rates are at an all time low due to the current financial climate. You can use an online tool like Credible to compare your current rates with the rates of several lenders at the same time. This way you will find the lender who offers you the best terms and rates.
A student loan refinance could offer you:
- A lower interest rate
- A shortened repayment period
- A simplified payment plan
Use a online student loan refinance calculatorTo get an idea of what your new monthly payments might be.
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