It has been a surreal and painful year, with a list of setbacks and challenges that everyone knows all too well and likely won’t forget.
Yet amid the chaos, we accomplished some tangible, measurable good in Congress — legislation that helped keep people on their feet and fiscally more secure. And as we close out this infamous year, there are a few final steps we must take to make sure that this good does not go to waste.
This past March, we met the full devastating force of the coronavirus. And despite the carnage, we moved quickly to pass several marquee legislative acts, including the CARES Act, in which Congress provided $2.2 trillion in short-term relief for financial hardships due to the pandemic.
Part of this legislation addressed the student loan crisis, including a provision to make student loan benefits from employers and employees tax-free — a simple but powerful alteration. Employers are now able to contribute up to $5,250 to each employee for eligible educational expenses, such as tuition assistance or student loan debt, all tax-free.
This gives employers an even better reason to offer student loan repayment benefits and offers employees more freedom to continue to earn a living wage while building for a more financially secure future. With these provisions, business leaders can better afford to help their employees where they need it most: Employees can pay down the principal on their student debt more quickly, and both companies and employees save on payroll and income taxes.
Since this legislation became law, interest in workplace student loan repayment programs has grown exponentially, and we’ve seen that the tax treatment is doing the good that we expected: More employers in all sectors and industries are contributing to student loans for their employees, providing a lifeline for workers of all stripes, ages, and backgrounds.
We have an opportunity to extend these provisions through December’s tax legislation, but if the provisions aren’t included, they will expire. If that happens, many companies that were offering student loan repayment benefits thanks to the CARES Act provisions may be forced to stop, in effect taking a giant step backward in our fight against student loan debt.
Of the almost $1.7 trillion owed in student debt in the United States, two-thirds are carried by women and minorities. Because student debt falls unequally on women and minorities, student loan repayment benefits help companies strengthen their diversity and equality initiatives. The social justice movement this year has helped companies understand that student loan repayment benefits can serve as a powerful tool to help address social inequality, giving human resources teams the mandate to include this topic in conversations around diversity and inclusion.
Offering student loan repayment benefits is a meaningful way for corporate stewards to demonstrate a commitment to their employees and give back to something that benefits them in the long run — an educated, thriving, diverse workforce. The favorable tax treatment makes this benefit even more appealing for leveling the playing field.
This year, we elected a new president. As we chart a path for a broader recovery, there’s a lot of buzz around sweeping legislation to address the student loan crisis, including loan forgiveness. But first, we must make sure to remember and preserve the good work we’ve already done, including the tax-free status of student loan payments. There is no silver bullet in this fight, and the provisions as enacted are a commonsense, accessible solution already in place, which comes at a relatively low cost to taxpayers.
Extending the tax treatment keeps more money in employee paychecks and provides a cost-effective tool for companies to support top talent through tough times. This is the time to take up every tool we can and support the workforce we aim to attract, retain, and motivate for the long haul.
Kate Winget is the head of participant engagement and experience for Morgan Stanley at Work.
