- The CARES Act allows employers to contribute $5,250 per year to each employee’s student loan.
- Student loan repayment assistance is a newer workplace benefit offered by some companies.
- You can use this simple email template to encourage your employer to start offering it.
It’s safe to say that student loan debt is one of the biggest financial burdens facing Americans today, even with the $10,000 to $20,000 in student loan forgiveness President Biden announced on August 24th.
According to the Education Data Initiative, the average student loan payment is $460 per month, and it takes the average borrower 20 years to pay off the debt. Additional data from the Federal Student Loan Portfolio shows that 63.9 million borrowers under the age of 61 owe a total of $1.4 trillion in federal student loans.
But your employer may be able to offer you some relief.
Your employer can pay $5,250 per year directly toward your federal student loans
At the beginning of the pandemic, the CARES Act was passed to get financial help to Americans quickly, including stimulus checks and money for small businesses. But one piece of legislation didn’t get as much attention: Section 2206, which allows employers to pay up to $5,250 in tax-free annual payments directly to their employees’ federal student loans.
Employers were able to offer these types of benefits long before the pandemic. According to the SHRM Employee Benefits Survey, 8% of companies nationwide offered student loan repayment in 2019 and 2020. The main difference under the CARES Act is that employer contributions are completely tax-free. This means that employees do not pay tax on this additional “income”, and employers do not owe payroll tax on these funds.
The CARES Act was only supposed to be in place for 2020, but under the 2021 Consolidated Appropriations Act, the combined spending bill and continuing coronavirus relief funds, that provision has been extended to December 31, 2025.
Tax Strategy and Benefits Attorney Joseph P. Yonadi, Jr. at Squire Patton Boggs LLP says the $5,250 annual back pay subsidy is an added benefit on top of an employee’s salary, health insurance and retirement benefits, meaning this isn’t money coming out of your paycheck — it’s cash from your employer that goes directly to your loans.
Sometimes benefits such as stock options are only available to higher-ranking employees who have been with the company longer. However, assistance to repay student loans is available to employees regardless of rank and salary.
Yonadi says, “Education costs have skyrocketed over the last 10 to 15 years. It’s a benefit to the employees because it alleviates some of that burden, and it’s a benefit to employers as well to retain.”
Due to job hopping normalized during The Great Resignation, employers are struggling to find ways to keep employees happy and loyal to their companies. Assistance for repayment of student loans can certainly be a good incentive to get employees to stay in the company for longer.
Yonadi adds, “We in the industry hope that this benefit will remain forever and that hopefully they will increase the $5,250 limit.”
Some companies offer a 401(k) match to repay your student loans
Outside of federal policy, technology companies have created solutions for employers to offer this benefit to their employees.
For example, the Vault employee platform makes it easy for employers to contribute between $50 and $500 monthly toward employee student loans. Vault even offers a 401(k) match program where employers can contribute a matching dollar amount based on how much employees pay on their student loans. The 401(k) match program rewards employees for paying off their student loans and encourages them to pay off their loans quickly by contributing more to the employee’s 401(k).
Vault co-founder Tony Aguilar says, “One thing we found is that employees, if they ask for it, is something that HR and the company feel they need to offer. It’s being asked by current employees and people who are interviewing. It’s a consistently things that continue to emerge. We have this new workforce that is just asking and forcing this advantage, which has been amazing to see.”
Ask your HR department for help with student loan repayment using this email template
When it comes to asking your employer about this benefit, Yonadi recommends being open and transparent. He adds, “You can simply say, ‘I have a debt burden from this education that you require me to have for this position. I want to save for retirement and pay off my debt within a reasonable time. How can you help me?’ ‘”
If you’d like to ask your employer to consider offering student loan repayment assistance, here’s an email template you can use:
I recently learned that employers can offer student loan repayment as an added benefit.
§ 2206 of the CARES Act states that employers can make tax-free payments of $5,250 per year directly to each employee’s federal student loans. This was only supposed to be in place in 2020, but it was extended to 31 December 2025 through Section 120 of Division EE of The Consolidated Appropriations Act of 2021. A summary of the provisions can be found here, on the National Law Review website.
Personally, I have (insert federal loan total) in federal student loans and my monthly payments are (enter monthly payment). I’m sure I’m not the only one feeling the pressure of student loan debt, so I wanted to speak up and advocate for the needs of employees at this company.
Want (insert company name here) Consider offering this benefit in the future?
(your name here)
Ask about student loan repayment assistance while interviewing for jobs
If you are interviewing for a new job, be sure to ask your potential employer the following questions:
- Do you offer support benefits when repaying student loans?
- If they don’t know about student loan repayment aid benefits, add: Under Section 2206 of the CARES Act and Section 120 and Division EE of The Consolidated Appropriations Act, employers can make tax-free contributions of up to $5,250 each year toward student loans . Will you be offering it in the future?
- What other benefits do you offer for people with student loan debt?