Our clients and prospects often ask if student loans in a parent's name are still eligible to participate in Student Loan Repayment plans. This can be a common occurrence today, where parents are trying to help shoulder the burden of their kids' debt from student loans. As an employer offering Student Loan Repayment, though, there may be tax implications if you consider covering loans for borrowers other than your employee. Here's what you need to know:
What types of loans are eligible to receive contribution?
Peanut Butter has specialized technology to help our clients ensure they are offering repayment plans only to appropriately eligible loans. For example, any loan that meets the following requirements is eligible to receive an employer-sponsored contribution:
- A student loan
- Shows the employee as the borrower on the loan
- Is in good standing
- Has a balance greater than $0
This can also include Parent PLUS loans and non-US student loans if the employer-sponsored plan chooses to allow these under their program rules.
What types of loans are not eligible?
To avoid delays when setting up your employer-sponsored student loan repayment plan, it's important to know what types of loans are not eligible. Peanut Butter's platform pre-programs all of these requirements for employers, so there are no additional steps or time required by our clients when administering the program. Loans that do not meet eligibility requirements include:
- Non-student loans (e.g., car or home loans)
- Loans where the employee is a co-signer, rather than the borrower
- Student loans that are not in good standing (i.e., in default).
How flexible can I make my employer-sponsored plan, if I so choose?
We do have some clients that strongly believe in offering a student loan repayment plan that is as flexible as possible. For those clients that don't want to verify the borrower who is receiving the company's benefit, we can still administer those plans.
If you're considering a student loan repayment plan that doesn't verify the borrower, just remember that the employer's responsibility to report taxable income may become more complicated if your repayment benefit is given to someone outside of the company's payroll system. You may need to issue 1099's for non-employees who receive your that student loan repayment.
Peanut Butter is always focused on helping our clients structure the student loan assistance benefit offerings that are best for them and will help their business thrive. In addition to the Student Loan Repayment benefit discussed in this article, Peanut Butter also offers Student Loan Resources, which some employers choose to offer as a first step toward helping their employees pay down their student debt.
Visit our site to learn more about Student Loan Assistance programs.
Or contact us to get started designing your student loan assistance program.