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The IRS is reminding employers who offer educational assistance programs that they can also use them to help pay for their employees’ student loans. The option to use educational assistance programs to pay for student loans has only been available for payments made after March 27, 2020. This student loan provision is set to expire December 31, 2025.
An educational assistance program is a separate written plan which provides educational assistance to employees. The program must be in writing and must ensure equal access for all employees, regardless of compensation. Educational assistance programs cover not just books and tuition, but also payments on employees' qualified education loans, whether sent directly to the lender or to the employee.
Educational benefits are generally exempt from federal taxes, including income, Social Security, Medicare, and FUTA taxes. By law, tax-free benefits are capped at $5,250 per employee annually; anything above is taxable as wages.
Employers can benefit from offering educational assistance programs to attract and retain talent. By providing student loan support, they demonstrate employee value and boost productivity, engagement, and satisfaction. Download the bulletin for more details.