Employer Student Loan Repayment: All You Need to Know

Q: What loans qualify for employer student loan repayment?

Federal and private student loans may qualify for employer student loan repayment. Federal law defines these qualified education loans as indebtedness incurred by the borrower solely to pay qualified higher education expenses for attending college. Privately refinanced student loans may qualify for employer student loan repayment as defined by federal law.

Q: Are there service commitments in employer repayment programs?

Employers may set the terms and conditions governing their student loan repayment programs. Participating in an employer’s student loan repayment program may come with strings attached. The employer may require service commitments from you in exchange for student loan repayment assistance. A service commitment may restrict your ability to quit or change jobs.

Q: How do you know if you are eligible for employer repayment programs?

Your employer can tell you whether there is a qualified student loan repayment program where you work. Such educational benefit programs are not offered by all employers. You may be eligible if you have qualified education loan indebtedness from the federal government or a private lender and work for an employer that offers student loan repayment assistance. Employers can set the parameters of their student loan repayment programs and may limit the reach of the program to exclude Direct PLUS Loans for parents.

What Is Employer Student Loan Repayment?

Sulaiman Abdur-RahmanUpdated August 9, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Employers may offer student loan repayment programs benefiting their eligible employees. The employer can make cash payments toward the principal and interest on any qualified education loan. That means employers can help you repay your federal and private student loans as an educational assistance benefit.The employer paying student loans can give the money directly to the employee or directly to the loan servicer. An employer student loan repayment program can provide tax-free educational assistance benefits up to $5,250 each year through at least 2025.Employer student loan repayment benefits can help you pay off your student loan debt faster. Below we highlight several ways an employer can offer student loan repayment benefits to their eligible employees.

What Is Employer Student Loan Repayment?

Employer student loan repayment is a program an employer may offer as an educational assistance benefit to eligible employees. The employer can pay an eligible employee’s student loans with tax-free educational benefits up to $5,250 each year through at least 2025.Getting employer student loan repayment assistance can help you pay off your student loan debt faster. The employer could give student loan repayment compensation directly to you as the employee or directly to your loan servicer. These benefit programs can help employees pay down federal and private student loan debt.The difference between private vs. federal student loans is the U.S. Department of Education provides or guarantees federal student loans, whereas banks, credit unions, online lenders, and state-based organizations may offer private education loans not guaranteed by the government.Student loans can help you pay for college, but some borrowers may never finish repaying a student loan during their lifetime. What happens to student loans when you die is the debt might be discharged, although some lenders may demand repayment from your estate.Recommended: How Long Does It Take To Pay Off Student Loans?

Types of Employer Student Loan Repayment

Employers may offer the following student loan repayment programs to eligible employees:

Cash Payment Educational Assistance

Employers can offer educational benefits in the form of cash payments directly to the employee or the employee’s loan servicer. SoFi, for example, offers eligible employees $200 a month in student loan repayment assistance with no cap.

Match Payment Educational Assistance

Employers can match an employee’s monthly student loan payments as an educational benefit. Aetna, for example, launched a student loan repayment program in January 2017 where it would match its employees’ U.S.-based student loan payment.s up to $2,000 per year for a lifetime maximum of up to $10,000 for qualifying loans.CVS Health Corporation acquired Aetna in 2018 and has its own set of employee benefits that include tuition assistance and reimbursement programs.

401(k) Match Educational Assistance

Employers can offer educational benefits via 401(k) matching programs. The employer in this scenario can make contributions to an employee’s 401(k) matching the employee’s student loan repayment expenses per pay period.Abbott Laboratories, for example, launched a program in 2018 allowing employees who contribute 2% of their pay toward their student loans to receive the equivalent of the company’s traditional 5% match deposited into their 401(k) plans.

Benefit Swap Educational Assistance

Employers may allow their employees to swap or trade certain employee benefits in exchange for educational benefits. Unum Group, for example, allows its eligible employees to convert unused paid time off into student debt relief assistance. Unum’s U.S. employees may transfer up to 40 hours of carry-over PTO into a payment against student debt.

What Is the Tax-Free Limit?

Employers can provide tax-free educational benefits up to $5,250 each year through at least 2025. That means employers can give eligible employees up to $5,250 per year toward student loan repayment assistance without classifying the benefit as wages. It also means employees don’t have to report those tax-free educational benefits to the IRS when filing taxes.Employers may give employees more than $5,250 in student loan repayment assistance, but any compensation above that threshold becomes a taxable wage.The Coronavirus Aid, Relief, and Economic Security Act, aka the CARES Act, allowed employers to give employees tax-free benefits up to $5,250 for repaying student loans in 2020. Congress extended the tax-free educational benefits for student loan repayments through 2025 with the Consolidated Appropriations Act, 2021. This benefit will end on Jan. 1, 2026, unless the federal government issues another extension or makes the benefit permanent.

Should You Consider Employer Student Loan Repayment?

Financial assistance programs, whether you’re getting a scholarship or student loan repayment assistance, may benefit you. Some employers may offer taxable and tax-free educational benefits. If an employer offers you tax-free and taxable student loan repayment benefits, that might be worthy of consideration.Another option you may consider is student loan refinancing, which replaces your existing student debt with a new loan agreement. You may refinance federal and private student loans with a private lender. Refinancing student loans may lower your interest rate. (Refinancing for a longer term may increase your total interest costs.)One of the big disadvantages of refinancing student loans with a private lender is you’ll be forfeiting federal benefits. Refinancing federal student loans will remove your access to federal income-driven repayment plans and forgiveness programs. Refinancing may not be right for you if you’re eligible for Public Service Loan Forgiveness or Teacher Loan Forgiveness. Recommended: How Does Student Loan Refinancing Work?

Explore Student Loan Refinancing Options with Lantern

If you’re questioning whether you should refinance your student loans, here are some points to consider:

You can refinance federal student loans with a private education loan

Private student loan borrowers may have fewer student loan deferment options than federal student loan borrowers

It might be difficult to refinance student loans with bad credit

It may be possible to negotiate a student loan payoff

People who serve in the U.S. armed forces may qualify for military student loan forgiveness

Private student loan borrowers may have fewer options for student loan forgiveness than federal student loan borrowers

After a three-year payment pause, the Covid-19 forbearance is set to end on Aug. 30, 2023. As a result, interest accrual on federal student loans will resume on Sept. 1, and payments will be due starting in October 2023.If you’re ready to refinance student loans, Lantern by SoFi can help. Just fill out a form and compare your student loan refinance options. Refinancing may be right for you if you can lock in a lower interest rate. (Refinancing for a longer term may increase your total interest costs.)Lantern can help you compare student loan refinance rates and find the best one for you.

Frequently Asked Questions

What loans qualify for employer student loan repayment?

Are there service commitments in employer repayment programs?

How do you know if you are eligible for employer repayment programs?

Photo credit: iStock/SDI Productions

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About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and served as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.

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