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With student loan repayments resuming soon, some borrowers might see a reduction in their monthly payments, but many will face increased financial strain. If your employer provides benefits, you could potentially access over $5,000 in tax-free aid for your student loans. Learn how to leverage your employer’s educational support program.
Maximizing Your Employer’s Educational Assistance Benefits
These programs often cover tuition, fees, books, supplies, and equipment for both undergraduate and graduate courses, even if unrelated to your job. Employees can exclude up to $5,250 in educational benefits from their W-2 income. (Amounts exceeding this limit are subject to taxes.)
Starting with payments made after March 27, 2020, employees can now use their educational assistance benefits to pay off both the principal and interest on eligible student loans. These payments can be issued directly to the employee or the lender until December 31, 2025.
To be eligible, the loan must have been used for educational costs like tuition, fees, room and board, or books and supplies for you, your spouse, or a dependent enrolled at least half-time. Loans from relatives or qualified employer plans do not qualify.
While the law permits using benefits for student loan payments, not all employers automatically include this option. Educational assistance programs must be documented in writing and comply with IRS regulations to qualify.
If unsure, inquire about your employer’s educational assistance program. Recent data from last year shows that some major employers already provide student loan reimbursement, with others planning to add it. If your employer doesn’t offer this, consider negotiating for it or exploring it when changing jobs.
