According to Student Loan Hero, there are 45 million Americans with student loan debt.
A provision under the CARES Act allowed companies to assist employees struggling with this debt. That program was then extended under the recently passed $900 billion COVID-19 relief package.
”This extension of the employer benefit means that the employer can pay up to $5,250 of an employee's student loan balance,” explained Meagan Landress, the founder and owner of Financial Coach Meagan.
But how do employees know if they qualify?
”It starts with the employer. The employer has to have a written benefits plan in place with this defined in that package. So again, it can’t just be like a bonus,” Landress shared.
It's a huge benefit for both parties involved, allowing the employer to receive a tax deduction and the employee to receive the financial assistance tax free.
”I anticipate there being an explosion of like these benefits coming into play with lots of companies because now it’s beneficial for everybody,” Landress shared.
According to the National Conference of State Legislatures, the provision has been extended through December 31, 2021.
"This is a lot of money, and of course the government will have to take on a lot of this debt if they do a more broad relief package for borrowers, but the potential upside is you’re going to have people who are able to eject money in the economy. That’s going to mean a lot to local businesses, states, and the nation over all,” said Brandon Rottinghaus, a political science professor at the University of Houston.
One of President-Elect Joe Biden's promises throughout his campaign was helping Americans with their student loan debt. Professor Rottinghaus says we can expect more discussion like this.
”I think you’re likely to see more discussion about debt relief. Joe Biden and the administration floated proposals to reduce individual student debt by between $10,000 and $50,000 by individual borrowers. That would pull millions, tens of millions of former students out of student debt,” Rottinghaus added.
The goal of the provision is to relieve Americans of debt to enable them to spend money and create a trickle effect within local economies.