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Student loan updates: What does it mean for employers?

In a nutshell:  Employers have an opportunity to make an annual contribution of up to $5,250 pre-tax dollars toward employees’ student debt balances until January 1, 2026. This benefit is especially attractive to employees now that the pause on federal student loan repayment is scheduled to end September 1, 2022, and employees will have to start making loan payments again. 

Overview of student loan debt benefit opportunity

  • Employers can make tax-free payments of up to $5,250 annually per employee until January 1, 2026
  • Both federal and private student loans are eligible
  • Employers and employees save on federal payroll taxes on qualifying payments
    • Employer gets a payroll tax exclusion on the student loan payments
    • Income exclusion is up to $5,250 per year per employee*
    • Employee doesn’t have to pay income tax on the student loan payments

* $5,250 limit is combined limit for employer loan assistance and tuition reimbursement

Student loan contributions vs. tuition assistance

  • Plan sponsors that already offer tuition reimbursement can expand their education benefit to offer student loan contributions
  • Offering both benefits can broaden the number of employees taking advantage of an education-related benefit
  • Note that if you offer multiple education related benefits, you will want to track the amounts contributed to each employee – since any amount that exceeds the $5,250 cap is subject to taxes

Federal student loan payment suspension

  • All federally-held student loan payments were paused starting in March 2020, at the start of the pandemic. While this temporary relief has been extended multiple times, the pause on federal student loan repayments is scheduled to end on September 1, 2022.
  • Interest will not accrue on federally-held loans while payments are suspended.
  • During the pause, individuals aren’t required to make payments but still can if they choose.

Student loan debt benefit solutions

To help employers address these challenges, Voya has formed a strategic relationship with Vault — an industry-leading student loan benefit technology provider— to offer flexible, tailored student loan benefit programs.  To learn more, contact your Voya Relationship Manager.

 

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Vault is a separate entity and not a corporate affiliate of Voya Financial. Voya clients receive discounted pricing on any Vault product. Vault pays Voya Retirement Insurance and Annuity Company (VRIAC) an ongoing quarterly marketing fee for referring plan sponsors that elect Vault’s student loan debt services.

Products and services offered through the Voya® family of companies.


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