The CARES Act, passed on March 27, 2020, is a $2.2 trillion relief package designed to address the immediate, staggering effects of the COVID-19 pandemic. A portion of the bill addressed student loans. Below are the provisions relevant to higher education borrowers:
Employer Payment of Student Loans
Under the CARES Act, an employer can make tax-free payments up to $5,250 per year for an employee’s “Educational Assistance.” They may do so now through January 1, 2021. This $5,250 cap can be paid directly to the employee or to a lender. This educational assistance has been defined as including but not limited to, (tuition, fees, books, supplies, and equipment). This payment is not taxable to the recipient.
Temporary Relief for Federal Student Loan Borrowers
- Payments on all student loans held by the U.S. Department of Education have been suspended through September 30, 2020.
- Interest has been waived for the duration of this suspension.
- For reporting purposes regarding the loan to a consumer reporting agency, any suspended payment will be treated as if were a regularly scheduled payment.
For the duration of this suspension, the Department of Education will suspend all involuntary collection related to the loan. Please be aware that this suspension is only available on loans owned by the U.S. Department of Education, including Direct loans and loans established under the Federal Family Education Loans Program that were transferred to the Department. Federal Family Education Loans, held by a bank or other financial institution, and private education loans are not covered by this suspension.
The information provided above reflects the cumulative efforts of Congress to provide relief for individuals and businesses. Aldrich Wealth will be monitoring the implementation of these provisions closely and will seek to provide updates as additional information surfaces.