Here’s why more and more employers are offering student loan repayment assistance
In light of the financial hardships many face during the COVID-19 pandemic, the federal government is offering 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 to and Success in College found that 62% of college seniors graduated with student debt in 2019, adding to the pool of 44.7 million people in debt.
The Society for Human Resources Management also found that 8% of companies were offering student loan repayment benefits to their employees in 2019, up from 4% in their last survey. That number is expected to continue to skyrocket thanks to a provision in 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 to compare student loan refinance rates from several lenders at once without affecting your credit score.
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How can an employer repay an employee’s student loan?
The CARES Act has brought a wide range of benefits, including a tax incentive for employers who provide education assistance and help their employees repay their student loans. The law allows employers to make tax-free contributions of up to $ 5,250 per year for employee tuition or student loans.
The student loan provision benefits employers and employees by allowing employers to avoid payroll taxes and save money on federal income tax. Plus, employer contributions can be used towards the loan principal balance or interest, allowing you to pay off student loans faster and save on long-term interest.
If you are struggling with private student loan debt, an online tool like Credible can be helpful in comparing student loan refinance rates from several lenders.
STUDENT LOAN REFINANCING RATES HAVE NEVER BEEN LOWER
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 to December 31, 2025 through a repayment assistance provision. student loans in the adopted Consolidated Credit Act. end of December 2020.
While student debt cancellation and changes to student loan cancellation are still debated, this five-year extension signals a bipartisan goal to reduce the student debt burden and place student debt. employers and the private sector at the forefront of the strategy.
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Does this apply to federal or private student loans?
Under the CARES Act and the Consolidated Credit Act, employers are permitted to make tax-free payments on âeligible student loansâ. 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 education.
This differs from the government’s guaranteed forbearance and interest-free period, which only applies to federal student loans.
If you have private loans and need extra help paying off your student loans during the pandemic, check with your lender, as some private companies offer emergency forbearance or temporarily waive late fees. If you are not happy with your lender’s options, go to Credible and see if you can get better financial assistance or lower rates from other lenders.
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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 get ahead of 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 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 once. 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 an online student loan refinance calculator to get a feel for what your new monthly payments might be.
CAN I REFINANCE PART OF MY STUDENT LOAN?
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