09/17/2020

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A Key Provision of the Cares Act Allows Employers to Help Pay Down Student Debt Tax-free



This article contains breaking news and events related to the current state of politics and the economy. While we try our best to keep our articles as up-to-date as possible, the ongoing effects of COVID-19 are happening in real time and information is subject to change.

In our efforts to bring you the latest updates on things that might impact your financial life, we may occasionally enter the political fray, covering candidates, bills, laws and more. Please note: SoFi does not endorse or take official positions on any candidates and the bills they may be sponsoring or proposing. We may occasionally support legislation that we believe would be beneficial to our members, and will make sure to call it out when we do. Our reporting otherwise is for informational purposes only, and shouldn’t be construed as an endorsement.

Many of the crucial measures of the CARES Act, the historic trillion-dollar relief package Congress passed in response to COVID-19, have been widely reported. We previously explored how this bill as a whole may impact our members. But there’s a specific provision we want to highlight that could impact you and help pay down your student loan debt.

That provision is a win-win. It will enable employers to support employees during this time of financial hardship and uncertainty by making tax-free contributions to help employees pay off student loan debt for the remainder of 2020. It’s also a unique way for employers to attract and retain talented employees.

This type of action is especially important as over 44 million Americans have outstanding student loan debt—one of the biggest consumer debt categories.

You may recall that late last year, you heard from CEO Anthony Noto about SoFi’s commitment to encouraging Congress to pass the Employment Participation in Repayment Act (EPRA). Alongside other industry players, SoFi was an active member of the Debt-Free Tax-Free Coalition , actively pushing to pass this legislation.

The action taken by the federal government as part of the COVID-19 response provides the benefit we hoped to see enacted in EPRA until 2021.

The impact of the legislation and what changes


For the remainder of 2020, employers will now be able to make tax-free contributions to help employees pay off student loan debt. Before the bill was signed into law, 12-37% (depending on your tax bracket) of employer contributions to student debt would get eaten up in federal income taxes. This legislation changes that.

Now, the bill allows your employer’s contributions, up to $5,250, to be tax-free. So, 100% of the money goes towards paying down your debt. Now, these contributions will not be treated as taxed income, and employees will likely be in a better position to pay off their student loan debt. Instead, the money can be used for savings, a mortgage, or everyday necessities.

Our hope is that employers will take advantage of this opportunity now to help their employees pay down their student loan debt through this tax-free contribution—and that if this program proves successful, Congress will renew this legislation for the years to come. That’s another reason why we need employers to step up now and use it.

What actions can you take now?

For our members currently paying off student loan debt: You can reach out to your employer, informing them about the recent legislation and asking if they have plans to take steps to adhere to it. Another action you can take now? If you currently hold a federal student loan, the CARES Act also included a provision that suspends payments and interest on federal student loans until September 30, 2020 .

For employers: This is an opportunity for you to do your part and support your employees during a stressful time when they arguably need it the most. Your decision to contribute to the financial wellbeing of your employees can set you and your company apart, especially during a time when the moral spotlight is on employers. Plus, it’s one more thing that can help you retain good employees. If you are interested in learning more about SoFi’s employer contribution program, SoFi at Work, please reach out to [email protected].

This week, SoFi hosted a webinar that covered the CARES Act impact on student loan benefits. Panelists, including SoFi’s General Counsel Rob Lavet, drafter of the original EPRA legislation, discussed strategies and resources HR professionals can use to support their employees in line with the recent legislation. You can listen to the full recording here.


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This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. [Bankruptcy]
In our efforts to bring you the latest updates on things that might impact your financial life, we may occasionally enter the political fray, covering candidates, bills, laws and more.
Please note: SoFi does not endorse or take official positions on any candidates and the bills they may be sponsoring or proposing. We may occasionally support legislation that we believe would be beneficial to our members, and will make sure to call it out when we do. Our reporting otherwise is for informational purposes only, and shouldn’t be construed as an endorsement.
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