S4778-118

What This Bill Does

This bill makes permanent a tax benefit that allows employers to contribute toward their employees' student loan payments without those contributions counting as taxable income. Currently, employers can provide up to $5,250 per year in student loan repayment assistance tax-free, but this provision was set to expire on January 1, 2026. The Employer Participation in Repayment Act removes that expiration date, making the benefit permanent.

Who Benefits and How

Employees with student loans benefit because they can receive up to $5,250 per year from their employer toward their student debt without paying income taxes on that money. For someone in the 22% tax bracket, this means saving over $1,100 per year in taxes.

Employers benefit by having a permanent, reliable benefit they can offer to recruit and retain talent. Companies no longer face uncertainty about whether this tax treatment will expire, allowing them to build long-term student loan repayment programs into their compensation packages.

Who Bears the Burden and How

The federal government (and by extension, taxpayers broadly) bears the cost through reduced tax revenue. Each dollar employers pay toward student loans that would otherwise be taxable income represents lost tax revenue.

Employees without student loans receive no direct benefit from this provision, potentially creating an equity gap in employer benefits between those with and without student debt.

Key Provisions

• Removes the January 1, 2026 sunset date from Section 127(c)(1)(B) of the Internal Revenue Code
• Makes the employer student loan payment exclusion permanent
• Applies to payments made after the date the bill is enacted
• Maintains the existing $5,250 annual cap on tax-free educational assistance (which includes both tuition and student loan payments combined)