The IRS reminded employers that their educational assistance programs can also used to help pay for their employees’ student loan obligations through Dec. 31, 2025.

Traditionally, educational assistance programs are used to pay for books, equipment, supplies, fees, tuition and other education expenses for the employee. 

The option to use educational assistance programs to pay for workers’ student loans has been available for payments made after March 27, 2020. These programs can now be used to pay the principal and interest on an employee’s qualified education loan. Payments made directly to the lender, as well as those made to the employee, may qualify.

In most cases, educational benefits are excluded from federal income tax withholding, Social Security tax, Medicare tax and federal employment tax. By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year.

Employers that don’t have an educational assistance program may still set one up. The IRS added that these programs must be in writing and cannot discriminate in favor of highly compensated employees.

These programs must be in writing and cannot discriminate in favor of highly compensated employees.

For information on other requirements, employers can go to Publication 15-B, Employer’s Tax Guide to Fringe Benefits.

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