Tax deductible student loan payments – for your employees

Aug 29, 2023

The timing couldn’t be worse for employees facing student loan payments again. Before you lose employees who are looking for jobs paying them more money, be aware that you can pay up to $5,250 per employee per year towards their student loan obligations and this money is tax free, under an educational assistance program.  These programs must be in writing and cannot discriminate in favor of highly compensated employees.  Reach out to us and let’s get your educational assistance program in place so that you can keep your A Players AND get a tax deduction.

Traditionally, educational assistance programs have been used to pay for books, equipment, supplies, fees, tuition and other education expenses for the employee. These programs can now also be used to pay principal and interest on an employee’s qualified education loans. Payments made directly to the lender, as well as those made to the employee, qualify. Though educational assistance programs have been available for many years, the option to use them to pay 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.

For details on what qualifies as a student loan, see Chapter 10 in Publication 970, Tax Benefits for Education.


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