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

HR pros know that helping employees with debt, particularly student loan debt, is a key ingredient to building financial wellness in the workforce. With nearly 43 million Americans carrying a total of roughly 1.7 trillion in federal student debt, it’s the rare employer that doesn’t have a significant number of employees with substantial student loans.

Not surprisingly, many HR leaders are looking at how they may be able to help. According to a 2025 report from the Employee Benefit Research Institute, roughly 26% of surveyed employers provide some form of student debt assistance (including debt coaching, resources, or consolidation services), with an additional 35% planning to offer them in the future.

Fortunately, recent legislation has simplified the rules regarding student loan repayment benefits. Employers now have two distinct, streamlined mechanisms to support employees with student debt: permanent tax-free direct assistance and SECURE 2.0 retirement matching. Below, we explain how these benefits work and how to use them to attract and retain talent while improving financial wellness across your team.

Student Loan Repayment Benefits

Though tax-advantaged educational assistance programs have been available for many years, employers can contribute $5,250 annually per employee toward student loan payments (not just tuition reimbursement) on a tax-exempt basis under Internal Revenue Code Section 127. While this student loan provision was originally temporary, the One Big Beautiful Bill Act (OBBBA) has made the student loan repayment benefit permanent. In addition, the $5,250 cap is set to be indexed for inflation starting in tax years beginning after 2026.

That means employees won’t pay income tax on contributions made by their employers toward educational assistance programs (up to applicable limits), yet the employer also gets a payroll tax exclusion on these funds.

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.

Here’s what to consider when offering student loan repayment benefits.

How Much Will You Offer?

The maximum allowed annually on a tax-exempt basis is $5,250 per employee (for 2026), but employers do not have to provide that much. Many organizations start with a $50 to $100 a month payment. Even this seemingly small amount can help employees save thousands of dollars in interest over the life of the loan if directed toward the principal.

The amount you’ll contribute likely depends on the overall costs you are willing to dedicate to this benefit. An employee survey or other demographic data can help you determine how many of your workers carry student debt and would likely qualify for this benefit, which can help you understand the cost. In addition, you may want to look at future hiring trends for the next several years to estimate the number of new employees likely to join the program.

Will You Tie Benefits to Tenure?

Some employers require a time commitment — such as three to five years at the company — in exchange for the student loan payments. Others may simply delay the benefit for new employees for six months or a year.

In determining the qualification surrounding your program, you’ll need to weigh the immediate need for student loan relief among your workers and your need for higher retention and recruiting rates.

Is Your Paperwork in Place?

A program document outlining the design of the student loan contribution plan that complies with IRS regulations is necessary to implement this benefit.

You’ll also need to make sure this benefit works with any other existing qualified education assistance programs you may offer, such as tuition reimbursement.

The tax-exempt limit applies to all tuition programs. So, if an employee receives reimbursement for a certification class, for example, and is eligible for student loan repayment for their undergraduate degree, the total of the two benefits per year for that employee cannot exceed $5,250 in 2026. Anything above that amount will be considered taxable wages.

Matching Contributions for Student Loan Repayment

Part of the SECURE Act 2.0, the matching contributions for student loan repayment benefit allows employers to match employees’ qualified student loan payments with contributions to their retirement accounts. This includes 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans.

Many HR leaders see the benefit as a win-win for employees. It allows them to pay down student debt while still participating in retirement savings, hopefully starting at an early age. The provision also benefits employers looking to offer a creative benefit to retain and recruit workers, as it removes many of the preexisting legal barriers and administrative complexities that discouraged some companies from adopting a student loan repayment feature.

Here’s what to know about the matching contributions for student loan payments program.

The Rules Are (Mostly) the Same for All Matches

A student loan matching benefit must abide by all the rules of a traditional match. This means that the eligibility criteria, matching contribution rate, and vesting schedule you apply to matching contributions on student loan payments must be the same as those you apply to elective deferrals.

There is, however, one small difference: 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.

Only Qualified Student Loan Payments are Eligible

Loans must be considered qualified education loans to be matched. That generally means any loans borrowed solely to pay for higher education expenses for the employee, their spouse, or a dependent. This includes refinanced student loans but not loans from a relative or retirement plan.

Loans eligible for repayment must have been used to pay for qualified education expenses including tuition, fees, books, supplies, equipment, and room and board for students enrolled at least half-time.

To receive a match, employees simply need to certify annually that they have made qualified student loan payments and the amount of these payments. Plan sponsors are allowed to rely on an employee’s certification and do not need to conduct an independent evaluation as to whether the payments meet all of the requirements to be qualified student loan payments.

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 now that borrowers are facing new repayment policies and program changes by the Trump administration. Student loan repayment and matching contributions are two benefits employers may want to consider in this current environment.

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 you build the benefits you need to create a successful and loyal workforce.

FAQ

Are student loan payment benefits tax-exempt?

Yes, employer-provided student loan payment benefits are tax-exempt up to an annual limit of $5,250 in 2026. Under Internal Revenue Code Section 127, employers can pay up to $5,250 directly to an employee’s student loan servicer or reimburse them directly. These payments are completely excluded from the employee’s gross taxable income, meaning they do not pay federal income on them. Beginning in 2027, the annual exclusion cap will be officially indexed for inflation.

Can employers offer student loan payment matches in retirement accounts?

Yes, employers can offer student loan payment matches in workplace retirement accounts. Under the SECURE 2.0 Act, which took effect in January 2024, companies can treat an employee’s Qualified Student Loan Payments (QSLPs) as if they were traditional salary deferrals. This allows employees who are paying down education debt to receive an employer retirement match without having to contribute any funds directly into the retirement plan.

What are the advantages of student debt repayment benefits?

Student loan repayment benefits can help attract and retain talented workers. They can also increase productivity among your employees by reducing the stress created by burdensome student debt and boosting overall financial wellness.

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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.

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