IRS Extends Student Loan Repayment Benefit for Employers Through 2025
The IRS recently made an announcement reminding employers they have until December 31, 2025, to take advantage of educational assistance programs to help employees pay down student loans.
Under current law, employers can contribute up to $5,250 per employee per year toward student loan repayment without those payments being treated as taxable wages. This provision was originally introduced as part of pandemic relief legislation and is set to expire on December 31, 2025, unless Congress takes action to extend it.
Traditionally, educational assistance programs have covered tuition, books, and other education-related expenses. Now, they can also include payments toward qualified student loans, offering a valuable tax-free benefit to employees burdened by educational debt. Payments may be made directly to the lender or reimbursed to the employee, provided they meet IRS criteria.
This extension is part of a broader effort to support workforce development and retention. By offering student loan repayment assistance, employers can attract and retain talent, especially among younger workers who often carry significant loan balances.
Tips for Setting Up and Administering Educational Assistance Programs
According to IRS Publication 15-B Employer’s Tax Guide to Fringe Benefits, here are a few key steps and best practices for employers looking to implement or enhance their educational assistance programs:
1. Create a Written Plan
The program must be documented in writing and clearly outline eligibility, covered expenses, and reimbursement procedures.
2. Ensure Non-Discrimination
The plan must not favor highly compensated employees. Benefits should be available broadly across the workforce.
3. Define Qualified Expenses
Include tuition, fees, books, supplies, and now student loan payments. Ensure that all covered expenses meet IRS definitions to ensure these contributions are not treated as taxable wages, making them a tax-free benefit for employees.
4. Track Contributions
Keep accurate records of payments made under the program. Contributions above $5,250 annually per employee are considered taxable wages.
5. Communicate the Benefit
Promote the program internally so employees are aware of the opportunity and understand how to participate.
Employers interested in offering this benefit should consult a tax advisor and review IRS guidance to ensure compliance. With the deadline set for the end of 2025, now is a great time to implement or expand educational assistance offerings to support employee financial wellness and long-term retention.
