Employer Student Loan Repayment Benefit: What to Know Before You Ask

With student debt continuing to burden millions of Americans, the search for relief has become more critical than ever, and a growing number of employers are stepping in to help employees tackle their student loans. This relatively new benefit—known as employer student loan repayment assistance—is gaining traction as a tool to retain talent.

Whether you're on the job hunt or already employed, understanding employer student loan repayment assistance could be a game-changer for your financial future. We’ll explain exactly what this benefit is, and how you can take advantage of it.

What is employer student loan repayment assistance?

Employer student loan repayment is a benefit some companies offer where they contribute directly to an employee's student loan payments. Unlike other forms of financial aid, such as 401(k) contributions or health insurance, it's specifically designed to help employees reduce their student loan debt. 

This assistance falls under the Qualified Educational Assistance Program (Section 127 of the Internal Revenue Code), a benefit that employers can offer to their employees to help with educational expenses.

The specifics of the student loan employer repayment can vary significantly from one employer to another (details below), and it may be subject to a cap, such as a maximum of $10,000 over the course of your employment. 

“The employer typically sets eligibility criteria, such as requiring a minimum tenure or limiting the benefit to full-time employees,” says Edward Hones, employment lawyer and founder of Hones Law. “While it’s not yet a common benefit, its popularity is growing as companies look for innovative ways to attract talent.”

In February 2019, a piece of legislation was introduced in the U.S. Congress to encourage employers to help their employees pay off student loans, called the Employer Participation in Repayment Act. This seeks to make employer contributions toward student loan repayment tax-free for employees.

As of now, the bill itself has not been permanently enacted and is awaiting further action in Congress. The Employer Participation in Repayment Act continues to be a part of discussions regarding student loan relief and benefits for employees. 

Meanwhile, many employers offer this benefit as an attractive value for their employees. Let’s explore the details of this assistance.

How does it work?

The student loan repayment benefit works similarly to other workplace benefits. The company sets aside a portion of funds to contribute toward your student loan debt, reducing your principal balance or covering interest payments.

“Employers can establish an educational assistance program to make payments towards the principal and interest on an employee's qualified education loan,” says Allie Levene, founder of employment law firm Levene Legal.  

There are generally two main ways this benefit can be structured:

• Direct payment: The employer makes direct payments to your student loan servicer on your behalf. This reduces your loan balance over time and helps you pay off your debt faster.

• Reimbursement: The employers may require you to make the payments first and then submit proof for reimbursement. While less common, this method allows employees to retain control over their payments.

Employers can choose to contribute on a monthly basis, at specified intervals, or as a one-time bonus. Depending on the employer, these contributions might range from a few hundred dollars annually to several thousand over the lifetime of the benefit.

Also, employers could “match an employee's student loan payment into an eligible retirement account,” Levene says. “This is a great way to help employees who might not otherwise be able to save for retirement because of their student loan debt.” This option became effective for plan years after December 31, 2024, she says, and has legal requirements that employers must meet.

Types of employer student loan repayment programs

There are different types of employer educational assistance programs, and they vary based on the company's budget, goals, and the nature of its workforce. Here are a few common types:

• Graduated assistance: In this model, the employer's contribution increases over time as you remain with the company. For instance, the employer might contribute $1,000 in your first year, $2,000 in your second year, and so on.

• Monthly contributions: Employers may provide monthly payments toward your student loans, typically between $50 and $200. These contributions can add up over time and significantly reduce your debt burden.

• Lump-sum payments: Some companies offer a one-time lump sum payment, usually after a certain period of employment. For example, after reaching a two-year milestone, the employer may contribute $5,000 toward your student loans. Not bad!

• Matching contributions: Similar to 401(k) plans, some employers match your student loan payments up to a certain amount. This incentivizes employees to keep up with their payments while benefiting from the employer's contribution.

• Tuition reimbursement programs: While not directly related to loan repayment, some employers offer tuition reimbursement programs for current employees pursuing further education. This can help reduce future student loan debt.

Advantages and disadvantages: Is it convenient?

As with any financial benefit, there are pros and cons to consider when evaluating the program. Here's a breakdown of the main student loan repayment benefits for employees:

Advantages:

• Accelerated debt payoff: Employer contributions can help you pay off your student loans faster, potentially saving you thousands in interest over the life of the loan.

• Financial peace of mind: For job seekers, this benefit can provide financial relief and reduce the stress of managing student debt, making it a compelling reason to choose a company that offers it.

• Improved job satisfaction: As a current employee, knowing that your employer is helping with your student loan repayment can enhance your sense of security and well-being, leading to greater job satisfaction.

• Tax advantages: Until 2025, employers can offer up to $5,250 per year in student loan repayment assistance tax-free under the CARES Act (Coronavirus Aid, Relief, and Economic Security). This tax break applies to both the employer and the employee, making the benefit even more attractive. The Employer Participation in Repayment Act seeks to extend and make this benefit permanent (if you support it, let your congressperson know!). 

Disadvantages:

• Limited availability: Despite its growing popularity, not all employers offer student loan repayment assistance. You may need to do some research or negotiation to secure this benefit.

• Tax implications (post-2025): If the tax exemption does expire after 2025, any contributions beyond $5,250 per year may be subject to federal income tax, reducing the overall value of the benefit. “Such payments may be considered taxable income depending on current legislation,” Hones says.

• Conditional benefits: Some educational assistance program requirements are that you stay with the company for a certain period to qualify for the student loan employer benefit. If you leave before fulfilling the requirement, you might forfeit the assistance.

• Impact on other benefits: Some employers may prioritize student loan repayment assistance over other benefits, such as 401(k) contributions or bonuses. Be sure to evaluate the full benefits package before making a decision.

IRS: Student loan repayment program guidance

The Internal Revenue Service (IRS) provides tax guidance on how student loans and related repayments are treated under the tax code. Here are two key takeaways about it:

• Student Loan Interest Deduction: The IRS allows eligible taxpayers to deduct up to $2,500 of student loan interest paid during the year on a qualified student loan. This deduction is an adjustment to income, so you can claim it even if you don't itemize deductions.

• Tax-Free Employer Contributions: Under the CARES Act, the IRS allows employers to contribute up to $5,250 per year toward an employee's student loans on a tax-free basis. This means that employees don’t have to pay federal income taxes on these contributions. This provision is temporary and is set to expire at the end of 2025 unless extended by new legislation. 

5 tips for negotiating student loan repayment assistance during the hiring process

If you're interested in employer student loan repayment assistance, don't be afraid to bring it up during the hiring process. Here are some recommendations to help you navigate the conversation.

1. Research their benefits

If having the student loan repayment employer benefit is a priority for you when you are in the search for your next role, look for companies that offer it and apply or contact them in case they have a job opening.

If you already have an interview, research whether the company offers student loan repayment assistance before. This information may be available on their website, in job postings, or through employee reviews. 

2. Ask about it early—don’t be shy!

During the interview process, ask about the company's benefits package, including any student loan repayment programs. You can do this when they ask you further questions or if they ask about your expectations for your next employer.

If they don't offer it, express your interest and inquire whether it's something they might consider. Also, it's important to understand their reason for not having it, maybe they offer something similar or better for you.

3. Highlight the value and importance

Emphasize how this benefit aligns with your financial goals and long-term commitment to the company. Employers are more likely to consider the benefit if they see it as a win-win for both parties. If it’s the case, mention that is a deal breaker. You have to be upfront with your requirements, and don’t waste anyone's time. 

4. Negotiate with one step in

When you've received a job offer, you're in a strong position to negotiate your compensation package, including benefits like student loan repayment assistance. While salary is often the main focus, many companies are open to discussing additional perks if they see it as a way to secure your commitment.

Let the employer know that you're genuinely interested in joining the team and that you appreciate the opportunity and frame your request for student loan repayment assistance as beneficial for both you and the company.

5. Leverage other offers

If you have multiple job offers, use the presence of student loan repayment assistance in one offer as leverage when negotiating with another company. You don't need to give every detail, but you can say something like, “Another offer I’m considering includes student loan repayment assistance, which is very appealing to me. Would your company be open to matching or offering a similar benefit?”

Remember to approach the conversation professionally and be open to compromise.

Already hired? Here’s how to ask for employer student loan repayment

If your company doesn't currently offer student loan repayment assistance, it doesn't hurt to ask. “Consider making your case during performance reviews or after demonstrating a track record of valuable contributions,” Hones says. 

Here's how you can approach the conversation:

• Review the company's current benefits. Before making your request, take time to understand the existing benefits package. This will help you make a more informed and compelling case for adding student loan repayment assistance.

• Present student loan repayment as a growing trend. Share articles, statistics, or examples of other companies offering this benefit, showing your employer how it can provide a competitive edge in attracting talent.

• Highlight the impact on retention and satisfaction. Explain how offering this benefit could increase employee loyalty and satisfaction, particularly among younger employees who are more likely to have student debt.

• Suggest starting with a pilot program. If your employer is hesitant, propose a trial run where the benefit is offered to a small group of employees or for a limited time to measure its effectiveness.

• Be patient and persistent. Change takes time! Don't be discouraged if your request isn't immediately granted. Continue to advocate for the benefit, and be prepared to revisit the conversation in the future.

While not every company offers this perk, those that do can provide a major boost in helping you tackle your student debt. Don't hesitate to advocate for the benefits that matter most to you.