An employee’s student loan repayment benefit from their employer is not taxed as income now through the end of 2025. Thanks to the CARES Act of 2020, employees are able to take advantage of up to $5,250 in tax-free student loan payment contributions from their employer. The Consolidated Appropriations Act, which was signed into law in December 2020, extended this tax break until December 31, 2025.
For employees lucky enough to work for a company that offers a student loan repayment program, the benefits of this perk are clear: Employees get “free money” from their employers to help pay down their student loans.
Key Points
• With employer student loan repayment programs, employers can help employees repay their student loans.
• Through these programs, employer contributions up to $5,250 annually are free from income and payroll taxes until December 31, 2025.
• Before 2020, employer contributions via student loan repayment programs were subject to taxes.
• The number of companies offering student loan repayment assistance doubled from 17% in 2021 to 34% in 2023.
• Student loan repayment benefits offered by employers can act as an incentive to potential employees.
Employer Student Loan Repayment Benefit and Taxes
Under employer student loan repayment programs, employers help employees pay back their student loans in amounts that vary from company to company. This monetary assistance can be a great help to individuals struggling with student loan debt — and may even ultimately have an impact on the economy. However, prior to 2020, employer contributions were subject to both payroll and income tax, which means that for employees, the benefit wasn’t quite as big as it might first appear.
That changed in early 2020, when the Coronavirus Aid, Relief, and Economic Security (CARES) Act expanded on this financial assistance by making all employer-match contributions up to $5,250 tax-free, exempt from both payroll and income tax.
While the measure implemented in the CARES Act was due to expire in January 2021, the Consolidated Appropriations Act signed by President Donald Trump in December 2020, extended that tax-free benefit for another 5 years, with a new expiration of December 31, 2025.
Understanding Employer Match of Student Loan Repayment
What is an employer student loan repayment program? It’s a way for companies to help alleviate their employees’ student loan debt burden by offering them a match (up to $5,250, tax-free) on payments they make toward their student loans every year. Employers make a regular contribution to an employee’s student loan balance, say $100 a month for example, while the employee continues to make regular payments.
In this way, employees can pay down more of their student loan balance and/or interest. Prior to the CARES Act, an employer’s student loan contributions were considered taxable income, but now through the end of 2025, they will be tax-free and fall under the same maximum (up to $5,250), as tuition reimbursement benefits from an employer.
There are a number of services available to companies who are looking to manage this kind of benefit. Just like the companies designed to help HR departments manage other benefits like health care, financial institutions can help assist with student loan repayment plans.
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Companies with Student Loan Repayment Benefits
The number of companies offering employer student loan repayment programs has doubled since 2021 from 17% to 34% in 2023. To get a sense of what kinds of programs different employers offer, here are several examples of companies who have this incentive in place:
• In 2019, Chegg, the education technology company best known for online textbook rentals, offers its entry level and manager level employees $5,000 annually toward student loan debt. Higher-level employees receive up to $3,000.
• Estée Lauder, the cosmetics company, launched their student loan benefit program in 2018 by offering $100 monthly for payback, with a cap of $10,000 total.
• In 2017, Fidelity, the brokerage firm, offers up to $15,000 in student loan repayment for its full-time employees, and up to $7,500 for part-time employees.
• Also in 2017, Live Nation, entertainment and events, began contributing $100 monthly to student loans, maxing out at $6,000 in repayment.
• Penguin Random House, the book publisher, reimburses up to $1,200 yearly (capped at $9,000) for student loans to full-time employees who have been with the company at least one year.
• PwC, in the financial services industry, offers $1,200 annually and up to $10,000 total for student loan payments.
• SoFi offers one of the more unique employer student loan repayment programs on the market, offering $200 a month in reimbursement with no cap.
Implementing a student loan repayment program with a matching contribution will depend on a company’s size and resources.
But this kind of incentive can appeal to potential new employees. Most companies do not require employees who leave the organization to repay the benefit. Paid out monthly, it can help with the most burdensome student loan payments, which some employees might find more valuable than, say, a year-end bonus.
So that employees can make the most of student loan repayment benefits and pay down loans in the most efficient way possible, it’s always a good idea for them to evaluate their current payment plan. For some individuals with federal student loans, switching to an income-driven repayment plan or consolidating their loans could make monthly loan payments more manageable.
For individuals with both private and federal student loans, it might make sense to consider refinancing your student loans through a private lender, such as SoFi. Refinancing combines multiple student loans — federal or private — into a single loan with one monthly payment. It can potentially lower your interest rate or give you access to more favorable loan terms.
That said, refinancing with a private lender means forfeiting access to federal loan benefits like income-driven repayment plans, deferment, and public service loan forgiveness. Nonetheless, if your credit score and earnings have improved since graduating from college, refinancing might be a way to pay less in interest with a lower interest rate and a shorter repayment term.
Save on Student Debt while Saving for Retirement
Helping employees pay down student loan debt, while also still saving for retirement, is a benefit that could really increase the appeal of an employer loan repayment program.
In 2018, the IRS cleared a path for employers to create a different kind of student loan payoff program that could help attract employees. The program was created by Abbott Laboratories, but companies of all sizes could use a similar approach.
The IRS allowed Abbott to help its employees save for retirement and pay down student debt with a program that allows employees who use at least 2% of their eligible salary to pay down a qualifying student loan to get a 5% contribution from Abbott annually into their 401(k).
Abbott’s program might inspire more employers to implement similar programs, where the company can make a tax-free contribution to the employee’s 401(k) on the condition the employee makes student loan payments.
The Takeaway
With the Consolidated Appropriations Act, which gave an extension of the rules set forth in the CARES Act, employer student loan repayment contributions up to $5,250 are payroll-tax and income-tax free until December 31, 2025. For individuals whose company offers such a benefit, this makes it more useful than ever before in paying down student loan debt.
Just like a 401(k) retirement match, a company that offers a student loan repayment program is basically offering you extra money. For many employees, even an extra $100 a month could be enough to help them get out of debt faster and feel more confident about their financial security.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Is the student loan repayment benefit taxable?
The employer student loan repayment benefit is not taxable through the end of December 2025. That means employees may get up to $5,250 in tax-free student loan contributions from their employer — if their employer offers the benefit — until December 31, 2025.
Is a loan repayment taxable income?
A student loan repayment benefit offered by an employer is not taxed as income through December 31, 2025, thanks to the Consolidated Appropriations Act, which was signed into law in 2020.
What is the student loan repayment benefit for employees?
The student loan repayment benefit for employees is offered by some companies to help their employees pay back their student loans. The amount an employer contributes differs from company to company. Employer contributions up to $5,250 are payroll-tax and income-tax free until December 31, 2025.
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