Wednesday December 6, 2023
Companies May Repay Employee Student Loans
In IR-2023-152, the Internal Revenue Service (IRS) reminded employers and employees of an educational assistance program to help pay student loans.
IRS Commissioner Danny Werfel noted, "The IRS wants to remind both employers and employees about this special feature that can help with student loans. There is a limited window of time for this educational assistance program and the IRS wants to make sure employers do not overlook this option that can help businesses attract and retain workers."
For many years, educational assistance programs permitted employers to provide up to $5,250 per employee each year. However, between March 27, 2020 and December 31, 2025, the educational assistance includes payment of employee student loans.
The traditional educational assistance programs paid for books, equipment, supplies, fees and tuition for an employee. The expanded option to pay student loans enables the employer to make the payment directly to the lender of an employee.
Many employers are interested in attracting and retaining talented and qualified employees. If they do not have an educational assistance program, they may wish to create one and add the student loan payment as an employee benefit. The student loan payment may be an amount up to $5,250 per year, per employee.
As is true of most employee benefit programs, the plan must be fair to all employees and may not favor highly compensated staff. IRS Publication 970, Tax Benefits for Education, is a helpful resource because it explains the qualification for a student loan.
The IRS will conduct a free webinar on the payment of employee student loans at 2:00 PM Eastern Time on Thursday, September 14, 2023. Registration is available on IRS.gov.
Sen. Mark Warner (D-VA) supported the plan to pay down employee student loans. He stated, "As student loan repayments resume, employers should take full advantage of educational assistance programs that can be used to help pay student loan obligations for their employees. This benefit not only provides a pathway towards student debt relief for borrowers but also gives employers the ability to recruit and retain high-quality talent. I am grateful that the IRS is continuing to conduct meaningful outreach to ensure that both employers and employees are seizing this opportunity."
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