Creating Education Assistance Programs in Your Company
to Help Take the Bite Out of Tuition and Other Education Costs

Educational assistance programs have traditionally helped employees who were also students pay for items like books, equipment, supplies, fees, tuition and other education expenses. But the programs can now also be used to pay for principal and interest on an employee’s qualified education loans. Both the payments made directly to the lender, along with those made to the employee, can qualify for the program.

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

Employers who currently lack an educational assistance program may wish to consider establishing one as a way to compete for talent in a tight labor market. Fringe benefits like educational assistance programs can help them attract and retain qualified employees.

The programs need to be set down in writing and they can’t discriminate in favor of highly compensated employees. For more information, see Publication 15-B, Employer’s Tax Guide to Fringe Benefits, and Publication 970, Tax Benefits for Education,

While these kinds of educational assistance programs have been available for many years, the ability to use them to pay back student loans has been available only for payments made after March 27, 2020, and, under current law, will continue to be available until Dec. 31, 2025.

That option has taken on more relevance now that the pause on student loan repayments is set to expire in October after the Biden administration faced court challenges on its plans for forgiving student loans from a group of GOP state attorneys general.

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The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.