QUESTION: Many of our company’s employees have student loans. Could we help them repay those loans using a qualified educational assistance program?
ANSWER: Educational assistance programs under Code § 127 currently can be used to help employees repay certain student loans, though certain restrictions apply. Here are some things to consider:
- Applicability Date. The loan repayment provision, originally set to expire at the end of 2025, was extended by July 2025 legislation and is now permanent and applies to payments made after March 27, 2020.
- Qualifying Loans. Loan repayment benefits can be used to pay principal or interest (or both) on any qualified education loan incurred by an employee for the employee’s education. For this purpose, the term “qualified education loan” has the same meaning as it has for the federal income tax deduction on education loan interest, which covers most loans for students who are enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an accredited post-secondary institution. For more information on which loans qualify, see IRS Publication 970.
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