Since 2020, employers with educational assistance programs have been able to use them to help pay for their employees' student loans. Traditionally, these programs covered expenses like books, equipment, supplies, fees, and tuition. However, the option to use them for student loans was set to expire on December 31, 2025.
The “One Big Beautiful Bill Act” (OBBBA) permanently allows employers to use educational assistance programs to pay employees’ student loans, including both principal and interest, whether paid to the lender or the employee.
Most educational benefits are tax-free up to $5,250 per employee each year. Starting in 2027, this limit will be adjusted annually for inflation.
Program Requirements
An educational assistance program is a separate written plan that provide educational assistance to employees. The program must be in writing and cannot discriminate in favor of highly compensated employees.
For additional requirements, see IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits, or Publication 970, Tax Benefits for Education.
Action Steps
As employees seek student loan assistance, employers without educational assistance programs should consider establishing one to leverage current provisions. Such benefits can attract and retain qualified workers. Offering student loan support shows employees they are valued, providing financial assistance that may boost productivity, engagement, and happiness. Download the bulletin for more details.
