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Navigating the complexities of educational assistance programs can be challenging for employers and employees alike. Recent legislation changes have expanded how employers can provide direct and indirect education assistance. Still, the tax incentives offered by the Secure 2.0 Act and Section 127 can be confusing. While they sound alike, they take different approaches to the same problem.

In this article, we’ll provide a detailed FAQ based on section 127 of the Internal Revenue Code to help you understand how these benefits can be leveraged, whether you’re an employer, employee, or self-employed individual.

What Is an Educational Assistance Program?

An educational assistance program is a plan established by an employer to provide educational benefits to its employees. To qualify under U.S. Code § 127, the educational assistance program must be a written plan that meets all legal requirements. These programs are designed to support employees in furthering their education, covering expenses such as tuition, qualified education loans, fees, books, and supplies.

Most importantly, these programs have the benefit that they are tax-free, up to $5,250 for 2026. This means the benefits provided under this threshold are not included in the employee’s gross income nor reported as wages on their Form W-2.

Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?

Can Educational Assistance Cover Loan Payments?

Yes, under certain conditions. Payments on principal or interest of qualified education loans are considered educational assistance benefits. These payments must be for the employee’s education and not for a family member’s education. The total combined limit for these payments and other educational assistance is currently $5,250 annually.

This expansion began for payments made after March 27, 2020, as part of the CARES Act. While originally temporary and set to expire at the end of 2025, recent legislation (the One Big Beautiful Bill Act of 2025) has made this student loan repayment provision permanent. Starting in 2027, the $5,250 annual cap is scheduled to be indexed for inflation.

Recommended: Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support

Are There Restrictions on the Types of Courses Covered?

Per the Code, educational assistance benefits cannot cover payments for the following items:

•   Meals, lodging, or transportation.

•   Tools or supplies (other than textbooks) that you can keep after completing the course of instruction (for example, educational assistance does not include payments for a computer or laptop that you keep).

•   Courses involving sports, games, or hobbies unless they:

◦   Have a reasonable relationship with the business of the employer

◦   Are required as part of a degree program

An employer can further define what their program will or will not pay for as long as it meets the other requirements of the provision.

Who Can Benefit From These Programs?

Educational assistance programs are intended for the exclusive benefit of employees. They cannot discriminate in favor of highly compensated employees or disproportionately benefit shareholders or owners. However, self-employed individuals and owners who meet specific criteria can also receive benefits, though not more than 5% of the total benefits provided can go to owners or their families.

Recommended: The Student Loan Crisis and Its Impact on Borrowers

What Happens if Benefits Exceed $5,250?

Suppose educational assistance benefits exceed $5,250 in 2026. In that case, the employer must include the excess amount in the employee’s gross income, subject to relevant business and income tax.

Both employers and employees should keep track of these benefits to ensure they are reported correctly. This is especially important for employees who change organizations within a given tax year, as the total assistance they receive can be at most $5,250 (for 2025 and 2026), regardless of the employer paying it. Additionally, any “unused” amounts of the $5,250 annual limit cannot be carried over by the employer/employee to subsequent years or retroactively applied to previous years of employment.

Can Educational Assistance Be Used for Non-Employees?

Generally, educational assistance benefits are exclusively for employees. Benefits extended to spouses or dependents do not qualify under section 127 and must be included in the employee’s gross income unless they also qualify as employees.

How Do Employers Benefit From Offering These Programs?

Employers can deduct the costs of educational assistance up to the $5,250 (or current) limit per employee per year as a business expense. This helps employers support their employees’ pursuit of higher education and skill development while also benefiting from tax incentives. Education assistance initiatives can enhance the workforce’s expertise and knowledge, boost employee morale and productivity, and help reduce employee turnover.

What Should Employers Include in an Educational Assistance Plan?

An effective educational assistance plan should clearly outline the eligibility criteria, types of benefits provided, conditions for receiving benefits, and procedures for claiming benefits. Employers may customize their plans to include provisions for part-time employees and/or prorate benefits based on employment tenure, or even grades received at course completion.

Here is an example plan document that outlines an Educational Assistance Program. Though it will have to be adapted to your organization’s unique needs and policies, this template can help you meet the written plan requirement.

The Takeaway

Educational assistance programs offer valuable benefits that significantly reduce the financial burden of furthering education. Both employers and employees stand to gain from well-structured programs that align with IRS guidelines. As these programs are subject to specific IRS rules and potential legislative changes, staying informed through reliable sources like IRS publications and updates is important for maximizing the benefits while remaining compliant.

For more detailed information or specific scenarios, you may also want to consult with a tax professional, who can provide guidance tailored to individual circumstances.

SoFi at Work can also help. We’re experts in the employee education assistance space. With SoFi at work, you can access platforms and information that will help build the benefits needed to create a successful and loyal workforce.

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). The 529 Savings and Selection Tool is provided by SoFi Wealth LLC, an SEC-registered investment adviser. For additional product-specific legal and licensing information, see SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2025 Social Finance, LLC. All rights reserved. Information as of November 2025 and is subject to change.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOAW-Q324-005

In the evolving landscape of employee benefits, HR professionals are increasingly recognizing the importance of supporting their workforce in managing student debt. With the ongoing changes in the federal student loan landscape and the introduction of innovative matching programs, there’s a pressing need for HR teams to stay informed and proactive. Here’s a closer look at the current state of student loan benefits and how HR can effectively implement these programs to enhance financial wellness in the workplace.

Understanding the Impact of Student Loan Debt

Student loan debt is a significant burden for millions of Americans. Today’s employees aren’t just looking for a paycheck; they are seeking employers who help them manage this financial strain.

As of December 2025, total education debt — including federal and private loans — totaled approximately $1.84 trillion, according to the Federal Reserve. This debt impacts a broad segment of the workforce, not just recent graduates. In fact, over 20% of borrowers are aged 50 or older, and those between 50 and 61 carry an average federal balance of $46,790.

The number of companies offering student loan benefits has risen sharply in recent years, fueled by new tax incentives and a competitive hiring market. Employers increasingly recognize that financial stress impacts the bottom line: SoFi at Work’s 2024 Future of Workplace Financial Well-Being study found that employees spend a full 8.2 hours dealing with finances every week while at work. Offering these benefits is now a vital strategy for both supporting staff and increasing workplace productivity.

Recommended: Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support

Legislative Enhancements for 2026

Two primary legislative changes make it significantly easier and more attractive for employers to offer student loan benefits: the permanence of tax-free repayments and the implementation of retirement matching for student loan payments.

Tax-Free Student Loan Repayment Benefits

Under the CARES Act, employers can contribute up to $5,250 annually per employee towards student loans on a tax-exempt basis. By enhancing Section 127 benefits, this provision not only helps employees but also offers payroll tax exclusions for employers, making it a mutually beneficial arrangement.

This benefit was set to expire on January 1, 2026. However, under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, the tax-free status of employer-provided student loan assistance is now permanent. Starting in 2027, the $5,250 limit will be adjusted annually for inflation.

Student Loan Retirement Matching Benefit

The retirement matching benefit (authorized in 2024 by the SECURE 2.0 Act) allows employers to make matching contributions to an employee’s retirement account based on an employee’s qualified student loan payments. Companies like Chipotle and Kimley-Horn have already adopted this innovative approach, allowing employees to address their student debt while enhancing their retirement savings, presenting a win-win scenario for financial wellness.

Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?

Implementing Student Loan Repayment Benefits

For HR professionals looking to implement or enhance student loan repayment benefits, several key considerations must be addressed:

Direct Educational Assistance Benefits (Section 127 Provisions)

•   Determine the contribution level. While the maximum tax-exempt direct contribution stands at $5,250, companies can start with smaller amounts, such as $25 to $100 per month, which can still significantly reduce the interest burden for employees.

•   Consider tenure and eligibility. Some companies may tie these benefits to tenure, requiring a certain period of employment before employees can qualify, which can aid in retention.

•   Ensure compliance. It’s important to have a program document that complies with IRS regulations and coordinates with any other educational assistance programs offered by the employer.

Recommended: Understanding Educational Assistance Programs: A Comprehensive FAQ

Qualified Student Loan Payment Matching (Secure 2.0 Act Provisions)

•   Understand the timeline for qualified student loan payments. When setting up a qualified student loan match, plan advisers and sponsors must be clear on the timing of when these payments may be reported. This is key because the timeline for these matching contributions differs from that of a traditional 401(k) deferral match. Understanding and communicating these timelines can ensure smooth implementation and compliance.

•   Don’t exceed matching fund limits. When it comes to the level of matching funds that are available, it’s important to note that contributions that exceed the 402(g) limit — which is the maximum amount of money employees may defer to their 401(k) plan each year — may not be matched. For 2026, this limit is set at $24,500. The traditional 401(k) rule for matching, which allows matching only up to this limit, remains in effect. This ensures that the matching contributions are made within the legal financial thresholds.

By carefully considering these aspects, HR professionals can effectively implement student loan repayment benefits that help employees manage their debt and align with regulatory requirements and fiscal prudence.

The Role of HR in Facilitating Smart Debt Management Without a Formal Program

HR can play a pivotal role in supporting employees with student debt beyond providing direct financial benefits. If your organization cannot yet implement Direct Educational Assistance or Qualified Student Loan Matching programs, consider hosting financial literacy workshops focused on debt management, budgeting, and loan terms.

In addition, you might provide access to Employee Assistance Programs (EAPs) or specialized financial planning vendors that can help employees navigate repayment and consolidation options. Partnering with a student loan refinancing company may also offer employees access to better terms and lower interest rates, empowering them to make more informed repayment decisions.

Recommended: The Student Loan Crisis and Its Impact on Borrowers

The Takeaway

As we navigate a landscape where student loan debt remains a critical issue for many workers, the role of HR in facilitating debt management and financial wellness is more important than ever. By leveraging legislative tools and providing educational support, HR professionals can significantly impact their employees’ financial health and, by extension, their overall job satisfaction and loyalty. This proactive approach not only enhances the company’s appeal to top talent but also fosters a supportive workplace culture that recognizes and addresses the real-world challenges its team members face.

Photo credit: iStock/ArLawKa AungTun

SOAW-Q126-001

In today’s fast-paced and ever-evolving corporate landscape, HR executives play a pivotal role in shaping the financial well-being of their workforce. Companies can foster a more productive, engaged, and satisfied workforce by prioritizing programs that address key financial concerns — spending habits, emergency savings, credit management, student debt, general debt, and retirement savings. Here’s a strategic blueprint for HR executives looking to make a significant impact in their organizations.

Strategic Priorities

1. Monitoring and Adjusting Spending

It’s crucial for employees to have a clear understanding of their spending habits to manage their finances effectively. HR can introduce financial well-being programs that provide robust budgeting tools and personalized financial advice. These resources help employees analyze their spending patterns, identify unnecessary expenditures, and reallocate funds towards essential financial goals such as debt reduction or savings.

Recommended: Top 10 Reasons Financial Wellness Is Important in the Workplace

2. Establishing Solid Emergency Funds

The creation of a reliable emergency fund is essential for financial security. When employees lack financial buffers, they often resort to high-interest loans or dip into their retirement funds to manage sudden expenses like car repairs or medical emergencies, which can have lasting negative financial effects.

By introducing an employer-sponsored emergency savings account (ESA), employers can facilitate easier savings for unforeseen expenses. This initiative can aid employees in handling unexpected costs, circumventing costly debts, and enhancing their financial stability and stress levels. For formal programs, employers have several options (in-plan or out-of-plan), but your organization can also start simpler.

HR departments can promote automated savings techniques, such as the payroll split deposit feature, which automatically diverts a specified portion of each paycheck into a savings account. This method not only ensures regular savings contributions without the need for manual transfers but also helps build a substantial financial buffer that can alleviate stress during unexpected financial situations.

3. Managing Credit and Creditworthiness

A strong credit score opens up financial opportunities for employees and can lead to lower borrowing costs. It’s an important factor that lenders use to decide if an applicant qualifies for a loan or credit card and the interest rate they will offer. It’s key for workers at all income levels to understand the elements that contribute to their credit scores, such as payment history, the amount of debt they carry, the variety of credit they manage, and the length of their credit history.

HR can organize educational workshops that provide clear guidance on effective credit management strategies. These sessions should cover key aspects such as the importance of making timely payments, keeping credit card balances low, and regularly checking credit reports to ensure accuracy and to identify areas for improvement. In addition, employers can make experts available to answer any questions workers have about what impacts their credit score and how they can monitor it effectively.

Recommended: Measuring the Financial Well-Being of Your Workforce

4. Navigating and Managing Student Loan Debt

Student loan debt can be overwhelming. Providing employees with tools and resources to manage this debt can relieve a significant source of stress within your workforce. And offering this type of support doesn’t necessarily require a significant investment of time or money.

No- or low-cost ways to assist employees in managing their student loan obligations effectively include:

•   Organizing webinars or seminars featuring financial planners to educate employees on debt management and refinancing options

•   Curating a page on the company portal with links to resources like loan payoff calculators and up-to-date information on repayment options.

•   Providing information on private refinancing options that may help employees lower their interest rates.

HR can also support employees with student debt by offering direct financial assistance and implementing a student loan-to-401(k) matching program under SECURE 2.0.

5. Comprehensive Debt Management Strategies

Effective management of overall debt is crucial for financial well-being. HR can facilitate access to debt management plans and financial counseling, which can help employees consolidate their debts, negotiate lower interest rates, and set up manageable repayment plans. These resources are invaluable in reducing the financial burden and stress associated with high levels of debt, thereby improving overall job performance and satisfaction.

6. Strategic Retirement Savings Planning

Educating employees about the importance of retirement planning and the benefits of early investments can help boost participation rates and reduce workplace stress. HR should provide clear information on various retirement savings options, such as 401(k) plans and Individual Retirement Accounts (IRAs). Highlighting the advantages of compound interest and the importance of consistent contributions can motivate employees to start planning early and invest wisely for their retirement.

The Takeaway

HR leaders can significantly enhance their employees’ financial well-being by implementing these strategic initiatives. These initiatives can improve individual employee well-being and contribute to a more stable and productive organizational environment. When employees feel financially supported, they are more likely to be engaged, dependable, and motivated, which is essential for the success and growth of any organization.

SoFi at Work can help. We’re experts in delivering comprehensive employee financial well-being benefits. With SoFi at work, you can access platforms and information that will help build the benefits needed to create a successful and loyal workforce.

Photo credit: iStock/VioletaStoimenova

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). The 529 Savings and Selection Tool is provided by SoFi Wealth LLC, an SEC-registered investment adviser. For additional product-specific legal and licensing information, see SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2025 Social Finance, LLC. All rights reserved. Information as of November 2025 and is subject to change.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOAW-Q126-003

When it comes to racial inequity, a 2024 report from the Brookings Institution highlights some good news along with a concerning trend: Black wealth is increasing, but so is the racial wealth gap.

The report analyzed data from the Federal Reserve’s most recent Survey for Consumer Finances (2023), which is a comprehensive survey on household wealth in the U.S. that is updated every three years. Household wealth measures the total value of assets a family owns (such as housing and business equity) minus their debts (such as student loans and credit card bills). Let’s take a closer look at the numbers.

The government’s data shows total wealth increased for all racial and ethnic groups, including Blacks, between 2019 and 2022. Median Black wealth increased from $27,970 to $44,890 but continued to lag behind other racial groups. In 2022, median wealth was approximately $62,000 for non-white Latino or Hispanic households and $285,000 for white households.This means that for every $100 in wealth held by white households, Black households held only $15.

Even more concerning: The nation’s racial wealth gap appears to be widening. Median wealth increased by $51,800 during the survey years, but the racial wealth gap increased by $49,950, resulting in a total difference of $240,120 in wealth between the median white household and the median Black household.

This gap has existed for a long time. Since 2010, the wealth disparity between Black and white families has continually expanded, the Brookings Institution notes. The divide largely stems from decades of systemic biases and structural barriers that have adversely impacted Blacks. Racial inequality in the housing, investment, debt, and credit markets has disadvantaged Black Americans’ ability to build, maintain, and pass on wealth. This has held true even as a healthy job market and rising home values have helped to boost Black wealth in recent years.

What Employers Can Do

While there is no magic bullet to end the racial wealth disparity, employers can use financial wellness programs to effectively narrow the gap. Offering the right tools and perks can give Black employees the opportunity to get a foothold in the housing market, accumulate savings, reduce their student debt, and build wealth over time.

Here’s a look at four programs that can help make your employees of color (along with all your employees) more financially resilient.

Promote Black Home Ownership

Owning versus renting a home contributes to wealth creation, but decades of discrimination in housing and credit markets have limited Black families’ access to homeownership. Only 44% of Black individuals own a home, according to the Brookings report, compared to nearly 73% of white individuals.

Offering benefits that promote employee home ownership can help bridge this gap and contribute to Black employee’s overall financial well-being.

Many employers are offering direct down payment assistance, such as paying a percentage of an employee’s down payment up to a maximum, or offering a loan that may be forgiven over a period of employment. This type of benefit is ever more appreciated in today’s inflated housing market, where mortgage rate hikes and limited inventory have caused down payment costs to swell.

Another way to help first-time Black home buyers is to offer counseling on accessing government-sponsored grants and low-interest loans designed to help first-time buyers cover down payments and closing costs. You might consider teaming up with local mortgage experts, financial counselors, and real estate pros (ideally from the Black community). They may offer free seminars and reduced fees and commissions for their services in return for a large pool of potential clients.

Provide Emergency Savings Support

On balance, Black households have a fraction of the wealth of white households, leaving them in a much more precarious financial situation when a crisis strikes. Wealth allows households to weather a financial emergency such as a loss of income or a family member’s illness.

A growing number of employers now offer ways to help employees bolster their backup savings so they’re able to meet unexpected expenses without racking up high-interest debt. This can provide all employees, and especially workers of color, increased financial stability and a foundation from which they can build long-term wealth. Having an emergency savings account can help employees feel more comfortable saving for retirement since they have funds set aside in case of emergency.

To encourage employees to prioritize emergency savings, consider offering an automated emergency savings program that allows them to make paycheck contributions to a dedicated account — possibly with a company match. You may also want to explore a relatively new workplace emergency savings program linked to retirement accounts called a PLESA (pension-linked emergency savings accounts).

PLESAs are designed to help employees increase their emergency savings while simultaneously saving for retirement. How it works: As of January 2024, employers can offer non-highly compensated employees an option to link their retirement plan to an emergency savings account. Employees may make Roth (after-tax) contributions until the account maxes out at $2,500 (or a lesser limit established by the employer). After that, additional contributions can be directed to the employee’s defined contribution plan or put on hold until the balance falls below the limit, at which point the employee can start contributing again.

Balances in an emergency savings account are eligible for distribution at least once per month and the first four distributions in a year must be free from any distribution fees.

Recommended: How Much Should Your Employees Have in Emergency Savings?

Help Close the Investment Gap

Investing in the financial markets, and especially the stock market, has historically been a major way to build wealth, and many Americans today invest this way through defined contribution retirement savings plans such as 401(k)s. However, stock equity was the area with the largest disparity in wealth growth among races, according to the Brookings report. Indeed, stock equity makes up nearly 30% of white wealth but only 4% of Black wealth.

Targeted and effective financial planning and investing counseling can help Black employees more easily access the equity markets. To incentivize Black (as well as all) employees to start investing sooner rather than later, consider offering a 401(k) match — that free money can prompt workers to enroll and boost their contributions. You might also think about offering retirement benefits to more employees (including new and part-time employees). Not imposing a lengthy qualifying work period encourages more workers to save for retirement and consider their financial futures.

Recommended: How to Support Your Low-Wage Workforce

Offer Student Loan Repayment Benefits

A college degree can be critically important to building a financially successful career, but student loan debt can delay the lifelong process of building wealth just as people are starting out in their careers. This is particularly true for Black college graduates, who owe an average of $25,000 more in student loan debt than white college graduates. Indeed, four years after graduation, black students owe an average of 188% more on their student loans than white students.

Racial disparities in student loan debt are a big part of the Black-white wealth gap. The student debt burden impedes the ability of Black graduates to build wealth in the same way as their white counterparts.

Employer-sponsored student loan repayment benefits can help bridge this gap, especially when they are targeted to employees who need them most. Two important benefits to consider:

•   Student Loan Repayment Assistance Employers can contribute $5,250 annually per employee toward tuition reimbursement or student loan payments on a tax-exempt basis. ​​Employers can make the payments directly to their employees’ student loan servicers or lenders, or they can provide them to the employees themselves, who can then put them toward their student debt.

•   Matching 401(k) Loan Payment Contributions As of January 2024, employers can officially match employees’ qualified student loan payments with contributions to their qualified retirement accounts. Employees can pay down student debt while still participating in retirement savings, including 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans. This program can be a particular boon for Black employees, allowing them to pay down student debt while still participating in retirement savings, hopefully starting at an early age.

The Takeaway

Employers can do their share to help bridge the racial wealth gap by offering the benefits and services that help Black employees in becoming investors as well as homeowners and reduce their student debt. This makes employers part of the solution to one of our nation’s most pressing and persistent challenges. SoFi at Work can help. We provide the benefit platforms and education resources that can enhance financial wellness throughout your workforce.

Photo credit: iStock/kate_sept2004

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). The 529 Savings and Selection Tool is provided by SoFi Wealth LLC, an SEC-registered investment adviser. For additional product-specific legal and licensing information, see SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2025 Social Finance, LLC. All rights reserved. Information as of November 2025 and is subject to change.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOAW-Q425-001

With the return of defaulted student loan collections and continued uncertainty surrounding income-driven repayment plans, student debt is once again emerging as a significant source of financial stress for employees across the country. And it’s not just workers who are feeling the strain — employers are increasingly affected as well.

Financial stress is known to contribute to lower job satisfaction, reduced engagement, and lost productivity. Now, new research suggests that student debt is a key factor in employee turnover, with debt-burdened workers significantly more likely to seek new opportunities compared to those without any student loan debt.

A recent study from the MissionSquare Research Institute, for example, found that employees with student debt were significantly less likely to say they would remain with their current employer compared to those without debt (39% vs. 61%). Only 34% of employees in the private sector with student loan debt indicated they’re likely to stay with their employer.

This aligns with earlier findings from the ADP Research Institute, which showed that any amount of student debt increases a worker’s intent to leave their current job — and those with the highest debt loads are twice as likely to be job-hunting compared to their debt-free peers.

Even if employees look but don’t immediately leave, these findings underscore a growing reality: Offering student debt repayment support may be more critical than ever for attracting and retaining top talent.

The Burden of Student Debt and How Employers Are Responding

An estimated one in four privately employed workers carries student debt. The average federal student loan debt balance is now $38,375, and the average total balance (including private loan debt) is $41,618. All told, 42.7 million borrowers currently owe more than $1.6 trillion in student debt, making student loan debt the second largest consumer debt balance in the U. S. (after mortgages).

Pervasive student debt is a barrier to financial security for many employees. Faced with such a heavy burden, borrowers are often unable to save for emergencies and retirement and may be forced to delay big life events.

Not surprisingly, many HR leaders are looking for ways to help. The number of employers offering student loan benefits more than tripled in the past five years, from 4% in 2019 to 14% in 2024, according to data from the International Foundation of Employee Benefit Plans. Here’s a look at some examples:

•   Athletico Physical Therapy: Athletico Physical Therapy, a national provider of orthopedic rehabilitation services partnering with SoFi at Work, provides eligible employees with a $100 monthly contribution (up to $1,200 annually) toward their student loans, starting on day one of employment. According to the company, this tax-free contribution can help the average Athletico employee save as much as $17,076 on their loan after eight years and pay the loans off 20 months faster.

•   Kimley-Horn: A premier engineering, planning, and design consultancy, Kimley-Horn took its award-winning employee benefits to the next level in 2024 with the introduction of matching 401(k) contributions based on an employee’s student loan repayments. How it works: Typically, the company offers a match of double an employee’s 4% contribution to a 401(k) with an 8% company contribution. Now, employees’ student loan repayments can replace all or a portion of the 4% contribution, allowing employees to continue to receive the company’s retirement match while paying down their student loans. Kimley-Horn also offers tuition reimbursement.

•   Community Health Systems: Tennessee-based hospital chain Community Health Systems (CHS) offers an employer-sponsored student loan repayment program designed to offset loan balances by up to $20,000 for most clinical employees. In addition, employees may consolidate their loans and possibly reduce interest rates through the program. CHS also offers a tuition reimbursement program that provides up to $5,000 in tax-free reimbursement annually.

•   CoStar Group: CoStar, a Washington, DC-based real estate data and research provider, offers a company match to an employee’s 401(k) for workers paying off student loans. The maximum total retirement match is 4%, as long as the employee contributes at least 4% of their pay directly to student loan repayment, or to their 401(k).

How to Implement Student Debt Benefits

These days, the question on many benefit leaders’ minds is not if they should implement student loan debt benefits but instead, what is the best way to do so. Below are some tips on how best to manage your student loan repayment benefits.

Consider Student Loan Reimbursement

Under current law, employers can contribute $5,250 annually per employee toward tuition reimbursement or student loan payments on a tax-exempt basis. The provision for student loan repayment, however, will only be available until Dec. 31, 2025, unless Congress passes new legislation to extend it.

Employers don’t have to pay the full $5,250. The average student loan payment is $536 a month, or $6,432 each year. Repaying even a small portion of these monthly payments is enough to impact your employees positively. As we saw above with Athletico, even seemingly small amounts can help employees save thousands of dollars in interest over the life of the loan.

You can start by offering a $100 or $200 monthly payment and increase the amount as you can. You could also offer different payments to different groups of employees. For instance, you might offer a lower payment amount to first-year employees than to those who have been with your company for a few years. This incentivizes employees to stay at your organization, reducing employee turnover and saving on talent acquisition costs.

To determine the amount that works for your company (and is likely to help retain workers), conduct an employee survey to find out how many of your workers carry student debt and would qualify for a reimbursement. You might also look at your future hiring expectations to estimate the number of new employees likely to join the program. From there, you can determine how much your organization can afford to contribute to each individual.

Consider Student Loan Repayment as Salary Deferral for Employer Match into Retirement

The Secure Act 2.0, which became law in 2022, is designed to encourage more American workers to save for retirement. Toward that end, it formally authorizes companies to match employees’ qualified student loan payments with contributions to their retirement accounts, including 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans.

This provision is not only a win for employees, but also for employers. Lowering debt and helping workers save for the future boosts the overall financial wellness of your workforce. Benefits managers, like those at Kimley-Horn, hope this benefit will help attract talent and retain employees who see their retirement savings increasing and student debt balances decreasing.

If you’re interested in implementing a similar program, there are a few rules to keep in mind. A student loan matching benefit must abide by all the rules of a traditional match, including eligibility criteria, matching contribution rate, and vesting schedule. However, there is one exception: You are allowed to deposit the matching contributions to the employee’s 401(k) plan account less frequently than regular matching contributions, as long as you contribute at least annually.

Recommended: The Future of Financial Well-Being in the Workplace

Rethink Your Tuition Reimbursement Program

Now may be a good time to reevaluate your tuition reimbursement programs or introduce this type of benefit. Tuition reimbursement helps employees avoid taking out large student loans in the first place. It also benefits employers in multiple ways: For one, it helps employees gain new skills and knowledge they can apply at work. It also serves as a retention tool, since workers can take just a few classes per semester while continuing to stay on the job. Including a retention clause specifying they need to stay a certain length of time after completing classes can help you keep valued workers in your organization.

Some things to consider as you start or retool a tuition reimbursement benefit:

•   Types of payment: Generally, employees pay for their classes upfront and submit tuition reimbursement forms to their employers after successfully completing them, but this can be a barrier to participation. Consider paying for classes at registration or directly to the school, making it easier for employers to take advantage of this benefit.

•   Tiered payment: Some programs reimburse employees for a percentage of costs based on their grades. For example, an “A” might qualify for 100% reimbursement, a “B” would get 85%, a “C” might result in 75%, etc. Or, you might pay 100% only for classes with a passing grade.

•   Types of courses: Many employers pay for courses related to the employee’s career. Still, you might include classes that could help your workers pursue other positions in your company.

•   Institutions: Many programs cover any accredited institutions, but a growing trend is for employers to enter exclusive partnerships with education providers.

•   Service requirements: You might specify a vesting period before qualifying for benefits and/or require employees to stay with the company for a certain period after completing the course in order to keep the funds.

The Takeaway

Benefits that can help ease the burden of student debt are important tools employers can utilize to recruit and retain talent and promote financial wellness among employees. This is especially important in light of new data that shows employees who feel they have a heavy student loan burden are far more likely to be in the process of leaving their organization.

SoFi at Work can help. We’re experts in the student lending space. With SoFi at work, you have access to platforms and information that can help build the benefits you need to create a successful and loyal workforce.

FAQ

Are employees changing jobs because of student debt?

They may be looking to do so. Although it might seem counterintuitive, new research shows that employees with perceived heavy student debt burdens are more likely to be job hunting than their peers with lighter or no debt burdens.

What can employers do to retain employees with student debt?

To support employees with student loan debt and improve their intent to stay, consider offering a student loan repayment contribution program and/or matching 401(k) contributions for student loan repayment.

How many employees are struggling with student debt?

That number will depend on your workforce demographics, but about a quarter of privately employed workers in the U.S. carry student debt.

Photo credit: iStock/SrdjanPav

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