The IRS recently issued a news release with a reminder that employers may contribute up to $5,250 annually per employee toward qualified student loan repayments if provided under a Section 127 educational assistance program.
Depending on how the educational assistance program is designed, an employer may provide tax-free payments of principal or interest on an employee’s qualified education loans for the employee’s own education. These payments can be made directly to the employee or the third-party educational provider or loan servicer.
This benefit was previously permitted for payments made after March 27, 2020, and before January 1, 2026. However, as we previously reported here, the One Big Beautiful Bill Act permanently extended the tax-free student loan repayment provisions and set the $5,250 annual amount to be annually indexed for inflation starting in 2026.
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