August 12, 2025
On August 6, 2025, the IRS issued a reminder that principal and interest charges on employees’ qualified education loans are eligible expenses under educational assistance programs. Employers can either reimburse the employee or pay the lender directly for qualified education loan expenses up to the $5,250 annual limit. Note that other eligible expenses include items such as current tuition, fees, books, and supplies.
To qualify as a Section 127 educational assistance program, the employer plan must be written and meet certain other requirements, including that it cannot discriminate in favor of highly compensated employees regarding eligibility for benefits. For further information, please see our July 2, 2024, article, summarizing IRS FAQs on educational assistance programs.
Employers who sponsor or are considering sponsoring educational assistance programs should be aware that student loan repayment expenses are currently qualified. This provision was set to expire December 31, 2025. However, the OBBBA made it permanent and indexed it to inflation for tax years starting January 1, 2026.
Educational assistance programs can provide a valuable benefit to employees facing student loan expenses. Fortunately, employers can continue to offer this benefit to their employees after December 31, 2025, and can expect to see the annual permitted maximum benefit amount increase over time as a result of inflation-indexing under the OBBBA.
IRS Reminds Employers: Employer Educational Assistance Programs Can Help Pay Employee Student Debt Loans Through 2025
PPI Benefit Solutions does not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.
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