IR-2023-152 August 24, 2023
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. Tax-free educational assistance program benefits are limited to $5,250 per employee per year. Normally, assistance provided above that level is taxable as wages.
The option to use them to pay student loans has been available only for payments made after March 27, 2020, and will continue to be available until Dec. 31, 2025.
Employers who don’t have an educational assistance program may want to consider setting one up. These programs must be in writing and cannot discriminate in favor of highly compensated employees. For information on other requirements, see Publication 15-B, Employer’s Tax Guide to Fringe Benefits. For details on what qualifies as a student loan, see Chapter 10 in Publication 970, Tax Benefits for Education.