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What if your employer could help pay down your student loans, without it coming out of your paycheck or being taxed? Employers have been able to help pay down student loans tax-free for some time, and the recent One Big Beautiful Bill Act has made this benefit permanent, allowing employers to contribute up to $5,250 annually toward employees’ qualified education expenses—including student loan payments.
Understanding The Rules
The One Big Beautiful Bill Act builds on a temporary change introduced during the Covid-19 pandemic that allowed employers to treat student loan repayment assistance the same as tuition assistance for tax purposes. That means any employer contributions did not count as taxable income for the employee.
Before the pandemic, Section 127 of the Internal Revenue Code allowed employers to provide up to $5,250 per year in tax-free educational assistance to employees, but it only applied to expenses like tuition, fees, books, supplies and equipment—notstudent loan repayments.
In 2020, the CARES Act temporarily expanded the tax-free benefit to include student loan repayment assistance, and the provision was set to expire at the end of 2025.
Now, under the One Big Beautiful Bill Act, that expansion has been made permanent, beginning with tax years after December 31, 2025. Employers can contribute up to $5,250 per year, tax-free, toward a variety of qualified education expenses, including student loans payments.
Other qualified education expenses under Section 127 include:
- Tuition
- Fees and other related costs
- Books, supplies, and equipment
To qualify for tax-free treatment, employer payments must be made under a formal educational assistance program that meets IRS requirements.
As of 2023, participation in student loan repayment programs was growing. According to the Bureau of Labor Statistics, 5% of both state and local government and private industry employees had access to student loan repayment benefits in 2023. Among private-sector employees in the highest wage sector, access was higher at 11%.
What to Do If Your Employer Offers This Perk
With federal student loan payments resuming and average monthly payments around $536, according to the Education Data Initiative, this benefit could make a real difference in workers’ take-home pay and long-term financial health. It also gives employers a fresh tool to recruit and retain talent, especially among younger employees who are more likely to carry student loan debt.
If your employer offers this perk—and many more may start doing so, now that the benefit is permanent—you won’t owe federal income tax on up to $5,250 of loan payments made on your behalf each year. That’s like getting an extra $5,250 in benefits without reporting it as income. For someone in the 22% tax bracket, that’s over $1,100 in annual tax savings.
Here’s what you can do to participate in the program:
- Contact HR to enroll in your company’s student loan repayment benefit program, if available.
- There are no income limits for receiving educational assistance benefits.
- Your employer can directly send payments to your loan servicer, or in some cases, you can be reimbursed for qualifying payments you make on your own.
- These payments count toward your loan balance as if you paid yourself.
- Because of the tax provision, these employer contributions (up to $5,250 per year) are excluded from your taxable income.
If you have private student loans, combining this employer benefit with refinancing can be a smart move. Refinancing typically lowers your interest rate, which reduces your monthly payments and the total amount you pay back over time.
When your employer pitches in as much as $5,250 tax-free on top of that each year, that money can help pay off your debt sooner and save you in interest over time. Here are some of the best student loan refinance lenders of 2025.
Bottom Line
The Big Beautiful Bill Act could change the game for anyone still dealing with student debt. It lets employers chip in up to $5,250 a year toward your loans without taxing them, so more of that help lowers what you owe.
It’s a smart way to ease the burden, keep more money in your pocket, and improve your overall financial health. If your employer already offers this—or is thinking about it—it’s a benefit worth taking advantage of.
