The CARES Act: What does it mean for employers and employees? 

Info for employers

Info for employees

In a nutshell: As an employer who offers Vault benefits, you can now contribute up to $5,250 tax-exempt dollars toward employees’ student debt balances. 

What changed for borrowers?

Can borrowers continue to make payments?

Yes. Vault advises that borrowers who are financially able to make student loan payments to continue to do so in order to take advantage of lack of interest accrual during this time period. 

What should I do?

The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income.* The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer. As an employer, you may make one time or multiple payments . The provision applies to any student loan payments made by an employer on behalf of an employee after the date of enactment and before January 1, 2021.

*Note that if you offer multiple education related benefits, you will want to track the amounts contributed to employees. Any amount the exceeds the $5250 cap is subject to taxes. 

3/20/2020

Student loan payment rules are changing daily, and Vault is monitoring those changes.  

The Department of Education has announced that it will allow anyone with federal student loans to enter into administrative forbearance for at least 60 days. 

What is administrative forbearance?

If an individual elects to enter into administrative forbearance, for at least 60 days beginning on March 13, if they have a federal student loan they do not have to make payments on those loans, and interest will not accrue. Please note that this applies to federal loans only.  Private loans are not eligible for this forbearance.

What do employees with loans have to do?

If an individual has federal student loans and cannot make their payments, they must reach out to their servicer and let them know that they wish to enter administrative forbearance. If they were already more than 30 days behind in their payments, their servicer has been directed to place their loans in administrative forbearance, retroactive to March 13.

Can employees still make payments on their federal loans?

Yes. Payments an individual makes during this time will be applied to any outstanding interest that accrued before March 13, and the rest will go towards their principal. Borrowers who are pursuing PSLF or whose payments are manageable will want to continue to make payments to make faster progress toward paying down their loans and completing forgiveness.

What about employer contributions?

Employer contributions will continue to be sent to the loan servicer you have chosen.  Those contributions will be processed as usual by servicers, whether individuals elect to enter into administrative forbearance or not.  

If you would like more information on student loan news, the U.S. Department of Education has published details related to the suspension of student loan payments here.

Here are other resources you might want to check out:

Coronavirus and Forbearance Info for Students, Borrowers, and Parents

What you need to know about student loans and the coronavirus pandemic

Nelnet: Important Coronavirus Information

Navient: Update on COVID-19 and your Student Loans 

Great Lakes: COVID-19 Update

FedLoan Servicing: COVID-19 Relief for Student Loan Borrowers

The CARES Act and Employee Student Loans

In a nutshell: As of March 27th, federal student loan servicers are suspending loan payments and setting interest rates to 0% for six months.

What is the CARES Act?

On March 27, 2020 Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in response to the Coronavirus pandemic. Among other things, this law provides relief for federal student loan borrowers.  From March 13 to September 30, 2020 federal student loans will be placed in an automatic administrative forbearance (temporary suspension of payments) and a 0% interest period.

Which types of loans are affected by the CARES Act?

       Federally-held student loans

      Direct loans (defaulted and nondefaulted)

      FFEL Program loans (defaulted and nondefaulted) not owned by commercial lenders, and

      Federal Perkins loans not owned by the university you attended

Does this apply to private loans?

No.  Private loans are not subject to the provisions of the CARES Act. 

What is “administrative forbearance”?

Administrative forbearance is a temporary suspension of your payments to your federal loan servicer.

Do I have to apply to have my federal loan payments suspended?

No. Federal loans will be automatically suspended by federal loan servicers.

When does the 0% interest period begin?

The 0% interest period began on March 13, 2020 and runs through September 30, 2020. Federal loan servicers are working to implement the 0% interest and will apply this change retroactively to March 13.  

Can I still make payments on my loans during this time?

Yes. If you choose to make payments to your loans between March 13 and September 30, 2020, your payment will first be applied to any interest accrued prior to March 13, then to principal. 

What happens to my regular auto-debit payments?

Auto-debit payments to federally-held loans will be automatically suspended during this administrative forbearance period.  

You can remain in administrative forbearance and make manual payments to your loan servicer, or if you wish to continue your auto-debit payments, you will need to contact your loan server to opt out of administrative forbearance and your auto-debit payments will resume.  

What happens if I made a payment after the CARES Act was enacted?

Any payment to a federally-held loan that was processed after March 13 can be refunded to you.  If you wish to receive a refund, you can contact your servicer to make that request.  

Can I still make payments on my federal loans?

Yes.  You can make payments in any amount to your federal loans during this administrative forbearance period.  If you are able to do so, making these payments could help you to pay off your loans sooner, as your payments will be applied to principal, once all interest accrued prior to March 13 is paid.

What if I’m pursuing PSLF?

As long as you continue to meet all other PSLF requirements* during the administrative forbearance period from March 13-September 20, you will not have to make payments to your federal student loans. During this automatic payment suspension for federal loans, your $0 payments will count as qualifying payments towards your PSLF progress.  

*PSLF requirements: You must have a Direct Loan, be on a qualifying repayment plan prior to March 13 and work full-time for a qualifying employer.

What if my loans are in default?

If you are trying to rehabilitate your loans, these suspended payments will count towards your rehabilitation.

Here are other resources you might want to check out:

Coronavirus and Forbearance Info for Students, Borrowers, and Parents

What you need to know about student loans and the coronavirus pandemic

Nelnet: Important Coronavirus Information

Navient: Update on COVID-19 and your Student Loans 

Great Lakes: COVID-19 Update

FedLoan Servicing: COVID-19 Relief for Student Loan Borrowers 

SEE ALL ARTICLES

The CARES Act: What does it mean for employers and employees? 

Info for employers

Info for employees

In a nutshell: As an employer who offers Vault benefits, you can now contribute up to $5,250 tax-exempt dollars toward employees’ student debt balances. 

What changed for borrowers?

Can borrowers continue to make payments?

Yes. Vault advises that borrowers who are financially able to make student loan payments to continue to do so in order to take advantage of lack of interest accrual during this time period. 

What should I do?

The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income.* The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer. As an employer, you may make one time or multiple payments . The provision applies to any student loan payments made by an employer on behalf of an employee after the date of enactment and before January 1, 2021.

*Note that if you offer multiple education related benefits, you will want to track the amounts contributed to employees. Any amount the exceeds the $5250 cap is subject to taxes. 

3/20/2020

Student loan payment rules are changing daily, and Vault is monitoring those changes.  

The Department of Education has announced that it will allow anyone with federal student loans to enter into administrative forbearance for at least 60 days. 

What is administrative forbearance?

If an individual elects to enter into administrative forbearance, for at least 60 days beginning on March 13, if they have a federal student loan they do not have to make payments on those loans, and interest will not accrue. Please note that this applies to federal loans only.  Private loans are not eligible for this forbearance.

What do employees with loans have to do?

If an individual has federal student loans and cannot make their payments, they must reach out to their servicer and let them know that they wish to enter administrative forbearance. If they were already more than 30 days behind in their payments, their servicer has been directed to place their loans in administrative forbearance, retroactive to March 13.

Can employees still make payments on their federal loans?

Yes. Payments an individual makes during this time will be applied to any outstanding interest that accrued before March 13, and the rest will go towards their principal. Borrowers may choose to continue to make payments to make faster progress toward paying down their loans.

What about employer contributions?

Employer contributions will continue to be sent to the loan servicer you have chosen.  Those contributions will be processed as usual by servicers, whether individuals elect to enter into administrative forbearance or not.  

If you would like more information on student loan news, the U.S. Department of Education has published details related to the suspension of student loan payments here.

Here are other resources you might want to check out:

Coronavirus and Forbearance Info for Students, Borrowers, and Parents

What you need to know about student loans and the coronavirus pandemic

Nelnet: Important Coronavirus Information

Navient: Update on COVID-19 and your Student Loans 

Great Lakes: COVID-19 Update

FedLoan Servicing: COVID-19 Relief for Student Loan Borrowers

The CARES Act and Employee Student Loans

In a nutshell: As of March 27th, federal student loan servicers are suspending loan payments and setting interest rates to 0% for six months.

What is the CARES Act?

On March 27, 2020 Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in response to the Coronavirus pandemic. Among other things, this law provides relief for federal student loan borrowers.  From March 13 to September 30, 2020 federal student loans will be placed in an automatic administrative forbearance (temporary suspension of payments) and a 0% interest period.

Which types of loans are affected by the CARES Act?

Federally-held student loans

Direct loans (defaulted and nondefaulted)

FFEL Program loans (defaulted and nondefaulted) not owned by commercial lenders, and

Federal Perkins loans not owned by the university you attended

Does this apply to private loans?

No.  Private loans are not subject to the provisions of the CARES Act. 

What is “administrative forbearance”?

Administrative forbearance is a temporary suspension of your payments to your federal loan servicer.

Do I have to apply to have my federal loan payments suspended?

No. Federal loans will be automatically suspended by federal loan servicers.

When does the 0% interest period begin?

The 0% interest period began on March 13, 2020 and runs through September 30, 2020. Federal loan servicers are working to implement the 0% interest and will apply this change retroactively to March 13.  

Can I still make payments on my loans during this time?

Yes. If you choose to make payments to your loans between March 13 and September 30, 2020, your payment will first be applied to any interest accrued prior to March 13, then to principal. 

What happens to my regular auto-debit payments?

Auto-debit payments to federally-held loans will be automatically suspended during this administrative forbearance period.  

You can remain in administrative forbearance and make manual payments to your loan servicer, or if you wish to continue your auto-debit payments, you will need to contact your loan server to opt out of administrative forbearance and your auto-debit payments will resume.  

What happens if I made a payment after the CARES Act was enacted?

Any payment to a federally-held loan that was processed after March 13 can be refunded to you.  If you wish to receive a refund, you can contact your servicer to make that request.  

Can I still make payments on my federal loans?

Yes.  You can make payments in any amount to your federal loans during this administrative forbearance period.  If you are able to do so, making these payments could help you to pay off your loans sooner, as your payments will be applied to principal, once all interest accrued prior to March 13 is paid.

What if I’m pursuing PSLF?

As long as you continue to meet all other PSLF requirements* during the administrative forbearance period from March 13-September 20, you will not have to make payments to your federal student loans. During this automatic payment suspension for federal loans, your $0 payments will count as qualifying payments towards your PSLF progress.  

*PSLF requirements: You must have a Direct Loan, be on a qualifying repayment plan prior to March 13 and work full-time for a qualifying employer.

What if my loans are in default?

If you are trying to rehabilitate your loans, these suspended payments will count towards your rehabilitation.

Here are other resources you might want to check out:

Coronavirus and Forbearance Info for Students, Borrowers, and Parents

What you need to know about student loans and the coronavirus pandemic

Nelnet: Important Coronavirus Information

Navient: Update on COVID-19 and your Student Loans 

Great Lakes: COVID-19 Update

FedLoan Servicing: COVID-19 Relief for Student Loan Borrowers 

SEE ALL ARTICLES

The Essential Guide to Student Loan Forgiveness and the 2020 Election

Student Loan Debt is $1.6 trillion and growing. 

American families saddled with high-interest debt are unable to afford homes, unexpected healthcare costs, or retirement savings. The economy is shrinking, and one thing is clear: Erasing unforgiving student loan debt is one way to invigorate the economy and uplift the millions of citizens who are struggling to make ends meet.

That’s why the 2020 election is full of student loan forgiveness plans. No matter which strategy you are looking at, here are two primary questions to consider:

  1. Will student loan forgiveness work?
  2. Will student loan repayment benefits still be relevant if the government passes any of these plans?

The answers may surprise you.

A Glimpse At The Current State of Loan Forgiveness

On a good day, one could call the current loan forgiveness schemes ineffective. 

There are several programs already in place with the sole purpose of easing the student loan burden. But they are often inaccessible, and can make the loan worse.

The most popular program is the Public Service Loan Forgiveness program, which requires graduates to volunteer or work in qualified government programs for ten years. However, the skills necessary usually mirror the other programs. In other words, they need teachers, medical professionals, and lawyers. 

And the application process isn’t simple. According to the United States accountability office, in April of 2019, only 55 out of 19,321 applicants were approved for loan forgiveness. That is less than 1%!

Income-based repayment programs can contribute to growing your student loan debt. This is because low payments on high debt can translate into paying off the interest instead of the principal. If your payments aren’t going towards the original loan, you may find your debt increasing instead of decreasing.

In other words, the loan forgiveness programs that exist are limited. 

How Much Debt Can Be Forgiven?

Three significant candidates have listed their student loan debt solutions in detail: Elizabeth Warren, Bernie Sanders, and Julian Castro

All three plans hope to reduce federal student loan debt, which makes up 92% of student loans. While Sanders desires to remove all student loan debt, Warren and Castro offer income-based plans, targeting low-income borrowers. But there are more limitations as well:

  1. Private debt, which amounts to $119.31 billion, will not be forgiven
  2. Depending on the plan, not all federal student loans would be eligible for forgiveness 
  3. Graduate school and advanced degrees would likely still require significant investments from students

This is all assuming the democratic candidates can pass their bill without any changes. Even if we see a debt forgiveness bill, it’s uncertain whether it will include all or even most of the student loans.

What Happens If College Becomes “Tuition-Free”

Could universities ever become like their western European counterparts and go tuition-free? Yes and no.

While tuition-free education would likely solve the student loan crisis for most Americans, the proposed plans would only cover four-year public universities, trade schools, and community colleges. In other words, private education would still be able to set their price. Even if private education reduces the bill, it’s likely students will still require loans to stay in school, especially if they don’t qualify for financial aid. 

Furthermore, students seeking to be lawyers, doctors, or nurses will still have to foot a massive bill for post-undergraduate studies. These programs are unlikely to receive government support, and even with loan forgiveness, are likely to rack up an outstanding debt.

The Future of Student Loan Repayment Benefits

Regardless of who wins the 2020 election, one this is certain: Student loan repayment benefits will still be boosting employee retention.

Private loans and universities aren’t going away. And many students will continue their journey in higher ed to achieve MBAs or other higher degrees before returning to the workforce. 

There is only so much the federal branch can do to minimize the impact of student loans in the short term. Loan forgiveness is simply a start, but without systemic change, the student loan system is likely going to stick around.

Until we find long-term solutions towards a more affordable higher education, the rest of us have the opportunity to uplift our employees and help them grow.

Contact us below to learn more how about Vault’s student loan repayment platform can be integrated into your company’s benefits package.

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