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The tax breaks within the CARES Act are changing the way that both employers and employees are viewing student loan repayment assistance as a potential company benefit. Read these frequently asked questions to learn more about this provision, and scroll on to calculate the potential impact of repayment assistance and download our email template to encourage your company to sign up.

Frequently Asked Questions

What change is the CARES Act making to the Internal Revenue Code of 1986?

SEC. 2206. EXCLUSION FOR CERTAIN EMPLOYER PAYMENTS OF STUDENT LOANS.

(a) IN GENERAL.—Paragraph (1) of section 127(c) of the Internal Revenue Code of 1986 is amended by striking ‘‘and’’ at the end of subparagraph (A), by redesignating subparagraph (B) as subparagraph (C), and by inserting after subparagraph (A) the following new subparagraph: 5 ‘‘(B) in the case of payments made before January 1, 2021, the payment by an employer, whether paid to the employee or to a lender, of principal or interest on any qualified education loan (as defined in section 221(d)(1)) incurred by the employee for education of the employee, and’’.

(b) CONFORMING AMENDMENT; DENIAL OF DOUBLE BENEFIT.—The first sentence of paragraph (1) of section 221(e) of the Internal Revenue Code of 1986 is amended by inserting before the period the following: ‘‘, or for which an exclusion is allowable under section 127 to the taxpayer by reason of the payment by the taxpayer’s employer of any indebtedness on a qualified education loan of the taxpayer’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to payments made after the date of the enactment of this Act.

Who benefits from this provision of the CARES Act?

Employers and employees alike greatly benefit from the passage of this act. Employers are now able to make payments toward their employees’ student loans on a tax free basis (up to $5,250 annually), thereby enabling employers to recruit and retain top tier talent by helping employees repay their student loans.

Employees are able to receive contributions toward their student loans from their employer without paying any taxes on the contributions (up to $5,250 annually), thereby enabling employees to save money on interest and pay off their loans more quickly while receiving this unique benefit.

What types of student loans are eligible for the tax exemption for employer payments?

It is important to note that not all loans are eligible for the tax exemption for employer student loan payments afforded by the passage of the CARES Act. Private loans or refinanced loans are not eligible, as well as Perkins loans and FFELP loans that are not owned by the federal government. Perkins and FFELP loans can be consolidated into a Direct Consolidation Loan which would be eligible, however borrowers should make sure to fully understand the effect on the interest rate of their loans and potential capitalized interest they could face on the new loan before doing so. Generally speaking, loans that DO qualify are loans that are also eligible for the federal deferment potion of the CARES Act. Be sure to check with your servicer for eligibility.

How much money can be saved if an employer contributes to an employee’s student loans?

The chart below is a hypothetical illustration of potential savings for an employee with $70,000 in student loan debt when receiving $100/month from their employer. In this scenario, the employer contributions result in total savings of over $13,000 for the employee!

Why should an employer offer this benefit to their employees?

Offering student loan debt assistance as an employer can have a significant positive impact on your business. Employers who offer student loan debt assistance are better able to recruit top tier talent and boost employee loyalty and retention by helping employees get out of debt faster. In fact, 86% of employees would commit to a company for 5 years if they helped pay off their student loan debt. Furthermore, 4% of companies nationwide are already offering this benefit to their workforces highlighting the existing demand for student loan debt assistance.

As an employer, how can I help my employees pay down their student loan debt?

Education Loan Finance offers an enterprise platform called ELFI for Business which enables our corporate clients to help their employees pay down their student loan debt faster. Through our simple and seamless integration, we provide you with a link to place on the benefits section of your Human Resources webpage that will bring your employees directly to the ELFI online application.

How are payments made to an employee’s student loan debt?

We offer multiple ways for employers to contribute to their employees’ student loan debt:

  • Employers can make upfront contributions through their payroll
  • Employers can make a bonus payment that can be applied directly to employee student loan debt
  • Employers can also make automatic monthly contributions that will be sent directly to the loan servicer on behalf of the employee

 

Student Loan Employer Contribution Impact

Calculate the estimated impact a monthly employer contribution can make.

All calculations are estimates based upon the employee loan details and employer contribution information provided and assume a fixed interest rate and corresponding APR. Monthly payments for loans with a variable interest rate are subject to change. Calculations also assume that the borrower makes full, on-time payments throughout the life of the loan. In addition, to any employer contribution. Actual savings will vary based upon a number of factors.

Let's get your employer on board.

Encourage your HR department and employer to partner with ELFI for Business. You can open an email template directly in your mail app or download a Microsoft Word document to copy and paste into an email.

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If your student loans aren’t eligible for relief as outlined in the CARES Act, such as some Perkins and Federal Family Education Loan (FFEL) loans, consider refinancing your student loan debt to take advantage of low interest rates. You can apply for student loan refinancing with ELFI 24/7 using our fast, 100% online loan application system.

Get to know ELFI for Business

Employers who offer student loan debt assistance are better able to recruit top tier talent and boost employee loyalty and retention by helping employees get out of debt faster. 

Related Blogs from ELFI

Employer Student Loan Assistance Programs
2020-04-17
Important Details on Employer Student Loan Assistance Programs

For student loan borrowers whose incomes have been affected by the coronavirus pandemic, the new CARES Act promises some much-needed relief. But beyond benefits like payment suspensions and interest waivers, the CARES Act delivers additional help in the form of employer-offered student loan benefits.

  By Kat Tretina Kat Tretina is a writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.  

For companies looking to attract top talent, it makes sense to pay attention to issues that affect employees’ lives. For young workers, one of the most significant problems is student loans. According to the Brookings Institute, over 42 million Americans have student debt.

 

To stand out from other employers, offering student loan repayment assistance is a desirable benefit. In fact, one survey found that 60% of adults with student loans said they would think about switching to an employer that offers student loan repayment aid. Now, thanks to the CARES Act, employers can take advantage of tax breaks to help their employees deal with their debt during this difficult time.

 

Challenges in Hiring

In the Society for Human Resources Management’s 2019 State of the Workplace report, the organization found that companies struggled to find workers to fill high-skilled positions. Employers in different sectors are experiencing a talent shortage, unable to find workers with specialized education and experience.

 

The industries hardest hit by this phenomenon are healthcare and technology, particularly in data analysis, science, and engineering.

 

The biggest reason companies said they struggled to hire suitable candidates? Competition from other employers. With a limited pool of skilled workers, companies have to work hard to stand out from other employers to get the best employees.

 

For skilled workers with student loan debt, one way employers can improve their compensation package is by offering student loan repayment assistance. And thanks to the CARES Act, that’s easier than ever for employers.

 

What is the CARES Act?

The COVID-19 virus pandemic devastated the United States’ economy, causing millions of people to lose their jobs or to experience reductions in income. With so many people struggling to make ends meet, the government created the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide economic assistance.

 

On March 27, 2020, President Trump signed the CARES Act into law. As part of the CARES Act, the following changes were made:

    • Stimulus checks up to $1,200: Individuals will receive up to $1,200 based on their 2019 tax returns, if they have already filed their returns. If not, the amount of the check will be based on their 2018 tax returns.
    • Extended unemployment protection: Eligible workers who are now unemployed can receive an additional $600 per week for up to four months.
    • Waivers of penalties for early withdrawals from retirement accounts: If people tap into their retirement accounts to make ends meet, the 10% early withdrawal penalty is waived. 
    • Federal student loan payments suspended until September 30, 2020: Federal student loan payments on Direct loans and federally-held FFEL loans and Perkins Loans are suspended for six months. During that time, no interest will accrue on the loan, and borrowers will still get payment credits toward loan forgiveness and loan rehabilitation programs.
 

How Does the CARES Act Affect Employer Student Debt Programs?

However, another benefit that is commonly overlooked is the expansion of employer student loan repayment assistance programs. 

 

Under the CARES Act, employers can contribute up to $5,250 toward an employee’s student loans from March 27 until December 31, 2020, and the payment is excluded from the employee’s income. It is also tax-free for the employer, since it’s not subject to payroll taxes up to the contribution threshold.

 

The CARES Act amended the tax code to incorporate provisions of yet-to-be-passed Employer Participation in Repayment Act, allowing employers to pay off up to $5,250 of an employee’s debt tax-free.

 

Currently, approximately eight percent of employers offer student loan repayment assistance and can take advantage of this benefit. However, it’s available to more companies if they wish to use it.

 

Previously, the tax treatment of employer student loan repayment assistance programs created a burden on both employees and companies, so this is a substantial benefit that may encourage more employers to offer this perk to their workers.

 

ELFI for Business

If you are a business owner or a human resources manager looking to improve your recruitment and retention efforts, offering student loan repayment benefits can be a powerful tool. If the idea of building your own program seems overwhelming, consider taking advantage of the ELFI for Business program.

 

The ELFI for Business program is designed to help employers recruit and retain top talent. In one survey, 86% of workers reported that they would commit to an employer for five years if they received help with their student loan payments. And, three in five survey respondents said paying off student loans is a priority over saving for retirement.

 

Employer contributions can make a dramatic difference on your employees’ debt. For example, let’s say your employee had $30,000 in student loans at 6% interest and a 10-year repayment term. If you contributed $100 per month toward the loan’s repayment, the repayment term would be reduced by three years. And, the employee would save $11,363.

 

ELFI for Business also gives your employees other tools to manage their debt, including:

  • Newsletters
  • New hire onboarding booklets
  • Webinars
  • Onsite consultations
 

Customized Student Loan Refinancing Advice

Employers that participate in the ELFI for Business program will also have access to loan advisors to help employees considering student loan refinancing.*

 

If your employees have student loans with high interest rates, refinancing can help them reduce their rate and save money over the length of their loan. And, by lowering their interest rate, more of their payment will go toward their principal instead of interest charges, so they can get out of debt faster.

 

ELFI customers have reported that they are saving an average of $272 every month and should see an average of $13,940 in total savings after refinancing their student loans1. When combined with employer contributions, refinancing can be an effective tool to pay off student loan debt.

 

Helping Employees During COVID-19

During these difficult times when so many are reeling from the coronavirus outbreak, offering benefits like student loan repayment assistance can make a major impact on your employees’ lives. Not only can it help recruit and retain good employees, but it can also build your company’s reputation and brand.

 

If you’re interested in introducing student loan repayment benefits in your workplace, contact ELFI for Business.

 
  *Subject to credit approval. Terms and conditions apply.   1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 2/7/2020 and 2/21/2020. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.  
2019-09-28
Down to Business: 5 Perks That Today’s Employees Demand

Perks have generally been regarded as nice-to-have additions to an employee’s basic salary and benefits package. Offerings such as flexible schedules, tuition reimbursements, employee discounts, and gym memberships have been seen as the icing on the cake that may sway a prospective hire to choose one employer over another. However, younger employees are regarding some desirable offerings by employers not as perks, but rather as essentials. Here are five perks that fall into this category.

1. Flex Time

Today’s employees don’t see the world in black or white or nine to five. Studies show the following:
One way to make the workplace more appealing to today’s workers is to do away with the rigid procedure of tracking work hours and vacation days. The only metrics that should matter are the productivity of staff members, how well they accomplish tasks, and team member morale. As long as employees do their work, a company shouldn’t care when or for how long they’re in the office.
  • Flex Time for Family - Employees should be encouraged to take time off when necessary. This includes providing the opportunity for new parents to stay out of the office for four to eight months following the birth or adoption of a baby, or to care for a close family member with a serious health condition. Another good idea is to offer reimbursement of expenses related to adoption or surrogacy.

2. Telecommuting

Today’s employees are rebelling over being forced to make a long commute every day, pay tolls, or cope with overcrowded and inefficient public transportation. One survey on telecommuting preferences found that nearly 90 percent of the US workforce would like to “telework.” Telecommuting two to three days a week was regarded as the sweet spot for a balance of working alone at home and collaborative work in the office.

3. Help with Student Loan Payments

Most young people starting out on their career paths are burdened with student loan payments. With that in mind, one perk that should not be overlooked is the potential to help your employees pay down their student loans. Student loan payments can eat into a worker’s paycheck for years and years, and worrying about them may affect their job performance. However, ELFI for Business can introduce you to several ways your company can help your employees pay off their student loan debt. Call us at 1.844.601.ELFI for more information on this innovative new program.

4. More Autonomy

Today’s workers don’t want to be micromanaged. Companies should recognize that autonomy is a basic psychological need, and the more autonomous their employees feel, the more likely they are to be engaged. Many studies show that more job independence leads to a workforce that is more content, healthier, and more productive.

5. More Time Off

The notion that you have to work at a company for five years in order to earn an extra week’s vacation time is regarded as outdated by today’s workforce. Millennials care more about having some adventure in their lives and less about money. Companies should consider offering non-monetary lifestyle bonuses such as:
  • Three weeks of vacation time from day one.
  • A day off on an employee’s birthday.
  • An earned bonus vacation week around an appropriate holiday.
  • A fourth week of vacation after someone has been there for three years.
  • After five years, eligibility for Summer Fridays off.

The Perks to Companies

There are very tangible benefits to companies that offer their employees flexible work options, telecommuting, assistance with student loan debt, more time off, and greater autonomy. These include the following:
  • Longevity – A study found that 86% of workers would commit to a company for five years if that company helped pay off their student loans. Moreover, millennials are likely to stay in a job for more than five years if their employers provide some flexibility about when and where they work.
  • Job satisfaction – One survey revealed that 90 percent of participants felt that more flexible work arrangements would boost their morale and increase their job satisfaction.
  • More productivity - It’s a simple equation: Happier employees leads to more engaged and productive employees.
  • Recruit more easily and quickly - A flexible work policy will improve a company’s recruitment metrics. One survey discovered that 77 percent of job seekers put flexible work schedules at the very top of their list of perks when evaluating job opportunities.

Join the Workplace of the Future

Job satisfaction is essential to a company’s overall success, which is why it’s crucial to offer perks that top talent are looking for. To learn more about how to make your workplace attractive to today’s employees, read The Best Place to Work: The Art and Science of Creating an Extraordinary Workplace, by Ron Friedman, an award-winning social psychologist and author. Then, contact ELFI to see how ELFI for Business can help your team attract and retain top talent!
NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.
Milliennials at work
2019-06-28
How Do You Become an Employer of Choice?

Is your company—the company everyone in your industry wants to work for or an “Employer of Choice?” Employers of choice consistently retain their highest performing employees and attract the best and the brightest over their competitors.  Employers of choice have little trouble recruiting talent since college graduates line up eagerly to interview for coveted jobs.   In today’s competitive labor market, the majority of companies do not qualify as employers of choice. Their workforces are in constant flux, and the cost of employee turnover is hurting the bottom line. Fortunately, that cycle can be halted and reversed. Any business can become an employer of choice by following these five strategies to transform company culture into one that (1) delivers value to employees, and (2) encourages their engagement.  

Make Your Workplace a Positive Environment

If your business has been getting by with lackluster performance and frequent turnover, you’ll need a critical eye to evaluate the current culture. Try to hire for longevity and look for the best possible fit for each unique position. Employers of choice search for employees who can make a positive impact on not only their work but their team, too.   With capable and involved staff, from new-hires to top management, you can build a workplace recognized for its atmosphere of trust, personal growth, and positive performance. There’s no room for micromanagement in this kind of workplace environment. Entrust your employees with a mission, direction, and goals—then step aside. Allow them to make decisions and respect their choices. In a positive environment, differences of opinion become opportunities for learning and growth.  

Provide Relevant Compensation & Benefits

Competitive compensation has always been a hook to catch the attention of potential employees. Even if your business cannot support top-tier pay and benefits, you can shape your compensation package to deliver the value your employees want. Offer the best salary you can afford and supplement it with bonuses and perks that reward company performance. Recognize that today’s employees place a high value on their time—and offer flexible scheduling and remote work options. Consider turning the standard break room into a comfortable lounge where workers can relax, play games or socialize. Go beyond the traditional benefits by adding college loan contributions, paid time off for family emergencies and parental leave to your benefits package.  

Encourage Professional Growth

Engaged employees have a keen interest in professional growth and career development. Employers of choice encourage this interest by supporting their team with relevant training and additional growth opportunities, including:  
  • Professional development seminars
  • On-the-job continuing education
  • Exposure to new tasks through job rotation
  • Tuition reimbursement for certifications & advanced degrees
  • Pathways for advancement
 

Establish Transparency

People like to know where they stand in a relationship, job, or career. Professionals who feel uncertain about their place in the organization, workplace expectations, or their own performance may seek other opportunities with another company. Transparent communication and clearly defined expectations give your team the perspective they need to stop worrying and start investing in the job. Employers of choice also develop channels for mentoring, giving helpful feedback and praise, and rewarding performance and risk-taking. They provide opportunities for teams to voice their ideas and concerns. Feeling safe and appreciated, employees buy-in to the company culture and become engaged.  

Create a Collaborative Culture

If your company is to become an employer of choice, you must develop a respectful and collaborative community. Engaged employees appreciate corporate responsibility, and they have expectations of your business that go beyond products, services, and profits. Workers want to feel their companies are good local and global citizens. Employers who embrace charitable outreach are rewarded with employees who are more confident, purposeful, and willing to work as a team. You can boost staff morale and develop a meaningful and relevant work community by sponsoring activities that include:  
  • Food & clothing drives
  • National fundraisers
  • Community clean-up initiatives
  • Health & wellness fairs
  • Recycling events
  • Health awareness campaigns
 

Become an Employer of Choice With ELFI for Business

Today, a college degree is more accessible than ever—and more expensive. An employer contribution to student loan repayment is one of the best ways to attract loyal employees. ELFI has created a cutting-edge benefits program that is easy to access through your HR portal and includes multiple incentives for attracting and keeping top talent. Take the first step to becoming an employer of choice.  

See Why Employees Leave

    NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.