Lori Meadows
The CARES Act introduced a tax-free benefit for student loan repayment, allowing employers to contribute up to $5,250 towards an employee's student loans on a tax-free basis. This has encouraged more companies to offer student loan reimbursement benefits to their employees. Additionally, the One Big Beautiful Bill Act, signed into law by President Trump, includes a provision to exempt employer student loan benefits from taxation, which is expected to further increase the number of companies offering student loan repayment assistance. While these acts provide some relief for student loan borrowers, the complex landscape of student loan repayment plans and recent changes to the SAVE Plan have left many borrowers confused and uncertain about their options.
| Characteristics | Values |
|---|---|
| What is the CARES Act? | A tax-free benefit for student loan repayment |
| What does it include? | Employers can contribute up to $5,250 toward an employee's student loans on a tax-free basis |
| When was it applicable? | From March 27, 2020, through December 2020 |
| What are the latest updates? | The One Big Beautiful Bill Act, signed into law by President Trump on July 4, 2025 |
| What does the new act include? | A new income-based Repayment Assistance Plan (RAP) |
| When will it be available? | By July 1, 2026 |
| Who is it for? | Undergraduate and graduate loan borrowers |
| What are the key differences between RAP and IDR plans? | RAP requires all borrowers to make a minimum payment of $10 per month, whereas IDR plans do not have this requirement |
| What are the repayment options under RAP? | Payments are tied to a simplified income formula, with a longer repayment period for larger balances |
| How does it impact Parent PLUS Loan borrowers? | They will no longer be eligible for alternative payment plans unless they consolidate their debt by July 1, 2026, and enroll in an IDR plan |
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What You'll Learn
SECURE Act 2.0
The CARES Act introduced a tax-free benefit for student loan repayment, allowing employers to contribute up to $5,250 towards an employee's student loans on a tax-free basis. This provision has encouraged many companies to implement student loan reimbursement programs.
Now, onto the SECURE Act 2.0:
The SECURE Act 2.0 is a piece of legislation that aims to strengthen the retirement system and improve Americans' financial readiness for retirement. The law introduces several changes to retirement plans and saving options.
One of the key provisions of the SECURE Act 2.0 is the increase in the age at which retirees must begin taking Required Minimum Distributions (RMDs) from their IRA and 401(k) accounts. The age has been increased to 73, and it will further increase to 75 beginning in 2033. This gives individuals more time to save and delay taking mandatory withdrawals from their retirement accounts.
The legislation also makes changes to catch-up contributions for older workers between the ages of 60 and 63 with workplace plans. Starting in 2025, these individuals will be able to make higher catch-up contributions of up to $11,250, allowing them to boost their retirement savings.
Additionally, the SECURE Act 2.0 includes provisions to help younger people continue saving while paying off student debt. It also makes it easier to move retirement accounts from employer to employer and allows retirement savers to start earlier by tapping into unused 529 funds.
Furthermore, the Act encourages employees to contribute to their employers' 401(k) or 403(b) plans by allowing for additional features in various employer retirement plans. For example, employers can now offer employees the option to designate certain matching and nonelective contributions as Roth contributions, providing more flexibility in retirement savings.
Overall, the SECURE Act 2.0 is designed to enhance retirement savings and provide individuals with more opportunities to prepare for their financial future.
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529 plan
The CARES Act introduced a tax-free benefit for student loan repayment, allowing employers to contribute up to $5,250 towards an employee's student loans on a tax-free basis from March 27, 2020, through December. This provision was made permanent as part of the One Big Beautiful Bill Act, with adjustments for inflation starting in 2026.
Now, for 529 plans:
Anyone can be named as a beneficiary of a 529 plan, including yourself, a relative, or a friend. There are no income restrictions on either the contributor or the beneficiary. Contributions cannot exceed the amount necessary for the qualified education expenses of the beneficiary, and there may be gift tax consequences if contributions for a particular beneficiary exceed $14,000 in a year. The designated beneficiary is usually the student or future student who will benefit from the plan and they are generally not limited to attending schools in the state that sponsors their 529 plan.
Qualified education expenses include tuition fees, books, room and board at an eligible education institution, and tuition at elementary or secondary schools. Additionally, 529 plans can cover the cost of purchasing computer technology, related equipment, and services such as internet access if used by the beneficiary and their family during the beneficiary's enrolment at an eligible educational institution.
An example of an accelerated transfer to a 529 plan is a contribution of $95,000 (or $190,000 for spouses who gift split) which will not result in federal transfer tax if no further annual exclusion gifts are made over the five-year period and if the transfer is reported as a series of five equal annual transfers.
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Student loan repayment limit
The student loan repayment landscape has become increasingly complex, with a variety of plans, limits, and forgiveness options available. The CARES Act introduced a tax-free benefit for student loan repayment, allowing employers to contribute up to $5,250 towards an employee's student loans on a tax-free basis. This has encouraged more companies to offer student loan reimbursement benefits to their employees. For example, Nvidia offers $350 per month towards student loans, with a lifetime maximum of $30,000, while New York Life caps the benefit at $170 per month or $2,040 per year, for a maximum of $10,200 over five years.
The Trump administration's One Big Beautiful Bill Act, which includes a new income-based Repayment Assistance Plan, is set to restrict enrollment in certain repayment plans, such as PAYE and ICR. The Act also eliminates Grad PLUS loans, which have higher interest rates, and borrower defence to repayment and closed school discharge rules, which allowed borrowers to have their federal debt discharged if they were defrauded by their institution or if their school closed.
The House and Senate have also proposed changes to the student loan repayment system, including the elimination of existing repayment plans and new limits on federal borrowing. The Senate's version proposes a lifetime borrowing limit of $100,000 for graduate borrowers and up to $200,000 for students in professional programs, while maintaining income-driven repayment plans. However, critics argue that these changes remove important protections for vulnerable borrowers, such as affordable repayment plans.
Additionally, the Biden-era repayment plan known as SAVE, which offered a zero per cent interest rate, has been deemed illegal, and interest will begin accruing for borrowers enrolled in this plan from August 1, 2025. The Trump administration is encouraging borrowers to switch to a legal repayment plan, such as the Income-Based Repayment Plan authorized under the Higher Education Act.
The complex nature of the student loan repayment system can be challenging for borrowers, and it is important to carefully consider the various options and their potential repercussions.
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Student loan as a retirement contribution
The CARES Act, passed in 2020, allowed employers to contribute up to $5,250 towards an employee's student loans on a tax-free basis. This provision was made permanent as part of the One Big Beautiful Bill Act, with adjustments for inflation starting in 2026.
The SECURE Act 2.0, passed in 2022, permits employers to match contributions to employees' retirement plans based on their student loan payments. This means that when an employee makes a student loan payment, their employer can contribute the same amount to the employee's retirement plan. This policy is intended to address the disproportionate impact of student loan debt on women and people of colour, who are less likely to have retirement savings.
Experts say that this contribution option could help many Americans, especially Black women, build a more stable financial future. However, it is important to note that student loan payments and retirement contributions are not equal, and that a dollar of retirement savings is worth more in the short and long term. Additionally, there may be tax benefits to contributing to a retirement plan instead of solely focusing on student loan payments.
For example, if an employee is unable to contribute enough to their retirement plan to receive their employer's maximum matching contribution, they may want to consider reducing their retirement plan contributions and prioritising student loan payments instead. This strategy can ensure that they receive the maximum benefit from their employer while still making progress on their student loan debt.
Overall, while student loan debt can be a significant burden, it is important to balance it with retirement contributions to ensure long-term financial stability.
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Student loan repayment benefits for employees
Some companies offer direct contributions to employees' student loans, with no cap on the benefits in terms of the time frame or amount. For example, United Talent provides direct contributions of $50 a month, while Nvidia offers $350 per month, up to a lifetime maximum of $30,000. Other companies, such as New York Life, cap the benefit at $170 per month or $2,040 per year, for a maximum of $10,200 over five years.
Some employers tie their student loan repayment benefits to retirement savings, contributing to employees' retirement funds if they put a certain percentage of their paycheck toward student loans. At least one company allows employees to apply unused paid time off toward their student loans instead of carrying it over to the following year.
Under the CARES Act, employers can contribute up to $5,250 toward an employee's student loans on a tax-free basis. This benefit was introduced as part of the Consolidated Appropriations Act in 2020 and is set to continue until December 31, 2025. A bipartisan bill has been introduced to extend this benefit indefinitely, but it has not yet gone to vote.
The One Big Beautiful Bill Act, signed into law by President Trump in July 2025, included a provision to exempt employer student loan benefits from taxation, with adjustments for inflation starting in 2026. This change is expected to lead more companies to offer student loan reimbursement benefits to their employees.
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Frequently asked questions
The CARES Act introduced a tax-free benefit for student loan repayment. It allowed employers to contribute up to $5,250 toward an employee's student loans on a tax-free basis.
The One Big Beautiful Bill Act includes a provision to exempt employer student loan benefits from taxation, with adjustments for inflation starting in 2026.
The changes should lead more companies to offer workers support in paying off education debt. It also includes a new income-based Repayment Assistance Plan (RAP) that will be available to borrowers by July 1, 2026.
The CARES Act introduced a tax-free benefit for student loan repayment, while the One Big Beautiful Bill Act exempts employer student loan benefits from taxation with adjustments for inflation.
You can check your eligibility for student loan forgiveness by logging into your account at StudentAid.gov. You can also use the Loan Simulator to estimate monthly payments under available repayment plans and determine repayment eligibility.
