Posted on: July 30, 2025
Student loan repayment just got a major upgrade—and it’s here to stay. Thanks to the newly passed “One, Big Beautiful Bill,” employers can now offer up to $5,250 per year in tax-free student loan contributions under IRS Section 127, indefinitely. This legislative bill solidifies a previously temporary provision and opens up a long-term opportunity for companies to deliver meaningful financial wellness support to their employees.
What is IRS Section 127?
For decades, Section 127 of the Internal Revenue Code has allowed employers to provide up to $5,250/year in tax-free tuition assistance to employees. Traditionally focused on continuing education and upskilling, it’s been a staple in benefits packages for companies that value talent development.
In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act expanded Section 127 to include student loan repayment, a move extended through 2025 via the Consolidated Appropriations Act. But the provision was always temporary—leaving employers uncertain about long-term strategy and employees unsure whether this support would last.
This Legislative Change Makes Student Loan Repayment Permanent
The “One Big Beautiful Bill Act,” signed into law in July 2025, has permanently made student loan repayment benefits part of Section 127. Employers can now:
- Contribute up to $5,250 annually, per employee.
- Avoid payroll taxes on these contributions.
- Provide student loan support alongside existing tuition assistance plans.
As Forbes reports, this change is part of a sweeping overhaul of the student loan system, which will also simplify repayment options and introduce lifetime borrowing caps. While income-driven plans like SAVE and PAYE will be phased out, the goal of new plans is to offer consistent, more predictable terms.
Why This Matters for Employers
This isn’t just a tax break—it’s a powerful tool for talent strategy, helping employers:
- Attract top talent—especially those of any age who are burdened by educational debt.
- Boost retention and engagement with a personalized financial wellness benefit.
- Stand out in a competitive market by offering progressive, value-driven support.
- Reduce payroll tax liability, enhancing the ROI of their benefits programs.
Why This Matters for Employees
Student loan repayment support has never been more relevant. As USA Today points out, this benefit offers timely key advantages, including:
- Contributions are not counted as taxable income, keeping take-home pay intact.
- Employees get a faster path to debt freedom.
- For many, it complements upcoming changes to repayment plans and helps bridge uncertainty during federal transitions.
How BenefitEd Helps Employers Take Action
BenefitEd’s expert team has been providing employers with education benefits, including student loan repayment, for many years. We simplify the implementation of student loan repayment benefits with:
- Proven turnkey technology and expertise to ensure IRS compliance.
- A customizable platform designed to match the needs of your workforce and budget.
- Seamless integration with your existing payroll and benefits platforms.
As this new chapter in student loan support begins, employers have a unique chance to champion financial wellness—without taking on tax consequences. BenefitEd is here to help make it effortless and impactful.
Let’s Lighten the Load
Your employees’ futures shouldn’t be weighed down by student debt. Partner with BenefitEd to offer smart, affordable education benefits that reflect your values and support their goals—while being tax-free. Contact our team and let’s build something impactful together.