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Did you know? There are IRS-approved assistance programs to help pay off student loans

Posted on October 29, 2023

Although educational assistance programs have been available for many years, the option for businesses to use them to help pay student loans is available only for payments made after March 27, 2020.

Employers that offer educational assistance programs can also use those programs to help pay their employees’ student loans. Under current law, this option will be available until Dec. 31, 2025.

How it works:

Traditionally, educational assistance programs have been used to pay for books, equipment, supplies, fees, tuition and other education expenses for the employee.

Recently, these programs have been extended so they can now also be used to pay principal and interest (which can be significant) on an employee’s qualified education loans.

Payments that are made directly to the lender, as well as those made to the employee, qualify.

By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Normally, assistance provided above that level is taxable as wages.

Got a question?

For information on specific requirements, see Publication 15-B, Employer’s Tax Guide to Fringe Benefits. Chapter 10 in Publication 970, Tax Benefits for Education also provides details on what qualifies as a student loan.

Of course, the CPAs at Teipen CPA Group are also well qualified to help answer any follow up queries you may have.