There are multiple programs available to rural providers to help alleviate student loan debt and/or provide student loan tax benefits. This blog covers the details and benefits of three of the available programs.
COVID-19 Relief/Cares Act
Section 2206 of the CARES Act allows up to $5,250 of annual student loan assistance paid by facilities to providers to be tax-free to the recipient through 12/31/2025. While not a direct benefit to the facility from a cost savings perspective, this can be used as a recruiting tool for potential new hires by providing $5,250 of the provider’s total compensation as tax-free dollars.
From a record-keeping perspective, we would suggest that both the provider and the facility maintain documentation supporting that student loan payments made by the provider equaled or exceeded the $5,250. The income exclusion is $5,250 per year per employee. Any benefits paid over the $5,250 will be taxable. The employer also needs to develop an educational assistance program (EAP), including a separate written plan within the requirements of IRC § 127. There are various rules to review and follow, including discrimination rules. For more information: https://www.law.cornell.edu/uscode/text/26/127
HPSA State Student Loan Repayment
Many states have loan repayment provisions related to services provided in health professional shortage areas. See below for programs that exist in several midwestern states:
The state will provide up to $25,000 annually for Physicians & Dentists and $20,000 annually for all other eligible health professionals for repayment of outstanding educational debt for providers who commit to providing services for a minimum of two years in a federally designated Health Professional Shortage Area (HPSA).
The state will provide matching funds of 50% towards student loan balances to doctors ($180,00 - $200,000), and other providers ($90,000 - $100,000) when the provider agrees to practice in a state-designated shortage area for two to four years.
The state will provide up to $40,000 annually towards student loans for a maximum of five years (maximum award of $200,000) for physicians.
National Health Service Corps Students to Service Loan Repayment Program
NHSC provides loan repayment assistance for medical, nursing, physician assistant, and dental students who are in their last year of school in return for a commitment to provide service in a HPSA of greatest need for three years of full-time clinical practice at one or more NHSC-approved sites. The benefit is up to $120,000 in four annual installments of $30,000. This is available nationwide. For more information: https://nhsc.hrsa.gov/loan-repayment/nhsc-students-to-service-loan-repayment-program
In this challenging time to recruit and maintain staff, providing student loan tax breaks and/or loan repayment benefits can be a useful tool. We recommend reviewing these programs and the related costs/benefits to ensure the facility is providing this potential benefit to the extent possible. If you have any questions, please contact us.
Brad Wittler is a Healthcare Manager at Lutz. He began his career in 2013. He is responsible for providing accounting and consulting services to healthcare organizations with a focus on financial reporting and reimbursements.
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