The federal pandemic relief package recently signed into law provided a five-year extension of a new program that allows employers to make nontaxable payments of up to $5,250 to employees as student loan repayment assistance.
The student loan repayment assistance program (LRAP) authorized in March by the Coronavirus Aid, Relief, and Economic Security (CARES) Act had been previously scheduled to expire on Dec. 31, 2020. The latest pandemic relief package tied to the federal Consolidated Appropriations Act of 2021 extends the program through 2025, according to Forbes.
This means this employee benefit aimed at easing the college debt burden so that employees have money to save for retirement will remain exempt from income and FICA taxes for both employers and employees.
Although the tax-free status of this employer-provided benefit remains, the legislation signed into law last week by President Donald Trump did not provide borrowers with another extension on repaying their student loan debt. The extension on repayments, and the waiver on interest during the time payments are suspended, is still scheduled to end on Jan. 31.
President-elect Joe Biden, who takes office on Jan. 20, has said a student loan repayment extension is needed, but has not provided details on the timeframe.
