Your boss might help you pay off that student loan

As the average student loan balance currently hovers around $40,000, some companies are helping employees pay down their balances through employer student loan assistance programs.

Like 401(k) matching programs, subsidized health insurance and paid time off, employer student loan assistance programs are another way for employers to attract valuable employees. They can also be a useful tool, especially if you have a substantial loan balance. 

Here are what employer student loan assistance program do, how they work and why their future is uncertain.

What are employer student loan assistance programs?

As part of the CARES Act and the Consolidated Appropriations Act, employers are allowed to contribute up to $5,250 toward an employee’s student loan balance with no tax consequences to the employee. If they contribute more, then that additional amount will be considered taxable income.

The amount paid can be put toward the loan’s principal and interest. Both federal and private student loans are eligible for this program. This is a huge shift because most student loan repayment or forgiveness programs are only available for borrowers with federal loans. 

This current benefit is set to expire Dec. 31, and some experts are unsure if it will continue under the Trump administration, which has signaled its opposition to expanding student loan forgiveness or repayment.

A 2023 survey from Paycor found that about 34% of employers provide some kind of student loan benefit, compared to just 17% in 2021. 

“As more employers provide LRAPs, it creates more competitive pressure on other employers,” said student loan expert Mark Kantrowitz, author of “How to Appeal for More College Financial Aid." “Employees with student loans have come to expect this kind of benefit and are disappointed when a prospective employer doesn't offer such a benefit.”

Employer student loan assistance programs can differ, depending on a company’s internal rules and policies.

For example, some programs require that employees contribute money to their company’s 401(k). The amount that they contribute to their 401(k) will be equal to the amount that the employer puts toward their student loans, often up to $5,250 per year. 

This program is designed to help young borrowers pay off their debt faster, as well as help companies recruit talented workers. It can also make employees more productive, since financial stress can seep into their day-to-day life. Having more productive and less distracted employees can ultimately help a company’s bottom line.

Will employer student loan assistance programs end?

It's unclear what will happen to employer student loan assistance programs. Because the tax-free benefit was set up as part of the CARES Act, it needs further legislation to keep going.

“Congress is likely to extend the Tax Cuts and Jobs Act of 2017 with only minor modifications, but possibly with several additions to address President Trump's campaign promises, such as eliminating taxes on tips and overtime,” Kantrowitz said.

A bipartisan bill introduced in 2024 would extend this benefit, but it has yet to be ratified. Republicans have been opposed to student loan forgiveness and debt cancellation, and it remains to be seen if they or Trump will support this program.

“The expiration of the provision only means that the student loan payments will be taxable to the employee,” Kantrowitz said.

Look into tuition assistance programs

If you’re considering going back to school, your employer may have a tuition assistance program, which is separate from a student loan assistance program.

Tuition assistance programs can help cover some or all of your tuition if you return to school while you’re employed. Each company has its own rules on how to qualify for tuition assistance. Some may only pay for school-related expenses if the degree is related to your job. 

Many require that you maintain a minimum GPA or take a certain number of classes. Tuition assistance programs are also tax-free for both the employer and employee. 

“Employers will likely continue to offer these benefits because they are good employee recruitment and retention tools,” Kantrowitz said.

Some employers mandate that you must stay at the company for a certain amount of time after receiving tuition assistance. Otherwise, you may have to pay them back some or all of your tuition assistance. This is another way to increase staff loyalty and minimize potentially costly staff turnover.