Helping Employees Pay Off Student Loan Debt

Coming in as Trend 8 in our SSG Employee Benefits Market Outlook, Education is largely seen as a path to higher income and greater financial well-being, but for many employees, this path has resulted in mounting student loan debt. Education debt is prevalent among people who went to college, especially younger adults.

According to the most recent economic well-being survey from the Federal Reserve, 30% of all adults—representing more than 4 in 10 people who pursued education beyond high school—reported that they took out student loans for their education.

As more graduates enter the workforce in 2025, it isn’t surprising that many seek employee benefits to alleviate this burden. Given the significant impact the new presidential administration could have on student debt relief initiatives and as legal challenges to current debt relief programs make their way through the courts, now is the time for employers to evaluate their benefit offerings and take advantage of several ways they can help their employees pay down their student loan debts in 2025.

Student loan assistance benefits are a compelling choice for employers who want to attract and retain qualified workers and secure a competitive advantage in the labor market. Several recent legislative changes have expanded the types of benefits employers can offer. Specifically, there are two key programs employers can offer heading into 2025: educational assistance programs and qualified student loan match programs. Although educational assistance programs have been available for many years, the option to use them to pay for student loans has only been available for payments made after March 27, 2020. Under current law, this student loan provision is set to expire on Dec. 31, 2025. While a bipartisan bill has been introduced in Congress that would extend this benefit permanently, no action has been taken yet, and with a new composition of Congress in 2025, the status of the bill remains to be seen.

An educational assistance program is a separate written plan that provides educational assistance to employees. Two key requirements are that these programs must be in writing and that they cannot discriminate in favor of highly compensated employees. Traditionally, educational assistance programs have been used to pay for employees’ books, equipment, supplies, fees, tuition and other education expenses.

However, at least throughout 2025, they can also be used to pay principal and interest on an employee’s qualified education loans. 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 (or FUTA) tax.

On the other hand, qualified student loan match programs allow employers that sponsor 401(k) plans, 403(b) plans, governmental 457(b) plans or SIMPLE individual retirement account plans to provide matching contributions based on employees’ qualified student loan payments rather than only on elective contributions to the retirement plan. While the option to offer this program became available in 2024, various plan administration questions were left open for employers who wanted to offer it.

In August 2024, the IRS released much-needed implementation guidance for employers seeking to offer a qualified student loan match program. The guidance addressed a variety of plan administration issues, such as applicable eligibility rules (including dollar and timing limitations), employee certification requirements, procedures a plan may adopt and applicable nondiscrimination testing. The guidance also provided a clear definition of what constitutes a qualified student loan payment. Specifically, qualified student loan payments are those that are made and certified by an employee during a plan year in repayment of a qualified education loan to pay for qualified higher education expenses of the employee, their spouse or their dependents, which do not exceed certain applicable limits when aggregated with other payments for the year.

The guidance applies for plan years beginning after Dec. 31, 2024, so employers wishing to offer this benefit in 2025 should review and adhere to the implementation guidance in consultation with their benefits counsel while monitoring for proposed regulations from the U.S. Department of the Treasury and the IRS. Plan sponsors may rely on the guidance until those proposed regulations are issued.

When student loan debt causes stress to employees, it can not only reduce workplace productivity, performance and morale, but it may also lead to high employee turnover rates as workers seek employers with better student loan assistance programs or higher compensation packages. As employees increasingly look to their employers for student loan assistance, employers who don’t already have these types of debt relief programs may want to consider establishing them in 2025, especially given the expiration date surrounding the student loan provision for educational assistance programs and the shifting political landscape.

By offering student loan support, employers can show employees they are valued and provide them with much-needed financial assistance and support, which may increase employee productivity, engagement and happiness.

Check out our 2025 Employee Benefits Market Outlook to learn more about which trends have the greatest potential to impact your organization moving forward. Doing so not only allows you to anticipate and adapt to the evolving employee benefits market, but it can also help you make informed decisions about benefits offerings, cost management strategies and more.

Contact SSG for additional information.