Employer student loan repayment: What it is and how to get it

Many programs help student loan borrowers pay down their debt faster, but student loan repayment assistance programs may be among the most effective.

These programs, offered by government agencies and private employers, can provide hundreds or even thousands of dollars in aid to borrowers every year. Currently, employers can provide up to $5,250 in student loan repayment annually as a tax-free benefit for employees.

Understanding how these programs work and how to qualify can bring you closer to your goal of paying off student loan debt. Consider all your options, including navigating student loan rates, to maximize your ability to repay your debt in a way that works for your budget.

Types of employer student loan repayment assistance

There are several different types of assistance you may receive, depending on your employer:

• Signing bonus: Some employers offer a lump-sum payment as a signing bonus when you first start at the company.
• Recurring payments: With platforms like Gradifi, employers can make direct payments to your lender on your behalf. These payments can occur monthly, annually or in some other interval. Some companies may even offer a lump-sum payment after you’ve been employed for a set period. In some cases, employers may include the assistance in your paycheck, which you can use to pay down your loans.
• Service-based assistance: If you’re a member of the military or your career qualifies you for a loan repayment assistance program offered by a government agency, you’ll typically receive annual payments or a lump-sum payment after you’ve provided the required service and met other program requirements.
• Tied to retirement savings: Employer retirement contributions are often tied to how much the employee sets aside for retirement. But in some cases, an employer may offer to contribute to your retirement if you put a certain percentage of your paycheck toward student loans instead.
• Trade unused vacation time: At least one company allows employees to apply some unused paid time off toward their student loans instead of carrying it over to the following year.

How employer student loan repayment gets taxed

In the past, student loan repayment assistance payments were considered taxable income to the employees and were subject to payroll taxes. But when the CARES Act passed in March 2020 as part of the relief provided amid the coronavirus pandemic, it allowed employers to provide up to $5,250 in annual student loan repayment assistance without tax consequences for the employer or the employee. The Consolidated Appropriations Act extended the tax break through 2025.

Note, however, that the $5,250 limit is a combined limit that also includes employer-provided tuition assistance programs. Many companies also offer tuition reimbursement, which is different than student loan reimbursement.

Tuition assistance programs typically reimburse employees up to a certain dollar amount after they complete their coursework. There are often specific eligibility requirements for the reimbursement, such as the courses being related to the employer’s industry or your job function. These programs target employee development, while the goal of student loan repayment programs is often employee financial wellness.

If you’re receiving assistance through a government program, you may not need to pay taxes on any of the assistance you receive. This is true of the National Health Service Corps Loan Repayment Program, which offers up to $50,000 in payments over two years. Check the program you’re applying for to learn whether taxes will come into play.

How to access employer student loan repayment benefits

If you’re working for a private employer that offers student loan repayment assistance, you may need to be with the company for a set period before you’re eligible. Some companies offer the benefit from the start.

If your current employer doesn’t offer the benefit, you may consider suggesting it to your human resources manager. Try highlighting the benefits to the company. For instance, employers who offer student loan repayment assistance can do so tax-free up to the $5,250 limit. Plus, offering these benefits may help recruit, engage and retain employees.

If your company isn’t interested, you can consider looking for a company that offers student loan repayment assistance.

Alternatively, you may be able to access student loan repayment assistance programs through a federal or state government agency based on your career choice. For example, health professionals, public defenders, military members and STEM workers may be eligible for loan repayment assistance programs. Do some research to find out if a government program exists for your occupation and whether you qualify.

Which companies pay off student loan debts?

More and more private companies are starting to offer student loan repayment assistance programs, so it isn’t easy to provide a comprehensive list. Employers who offer student loan repayment benefits include firms like Ally Financial, Chegg, Google and more.

According to the Society for Human Resource Management, just 8 percent of companies offered a student loan repayment benefit in 2019. In 2023, that figure grew to 34 percent, according to a report by the Employee Benefit Research Institute.

The bottom line

Student loan repayment benefits offered by employers are slowly increasing in popularity. And thanks to the Consolidated Appropriations Act of 2021, employers can now provide student loan repayment as a tax-free benefit through 2025.

If you’re job searching and your student loan debt is a concern, it pays to look for employers who offer this benefit. If you already work for an employer offering this type of program, ensure you understand how the program works to maximize the benefit. You won’t want to miss out on assistance in repaying student loans.

Use Bankrate’s student loan calculator to help determine how much employer assistance could speed your repayment process and save you on interest.