Employer-Sponsored Repayment Programs

Employer-Sponsored Repayment Programs

Certain companies and government agencies offer benefit programs as part of their employment to assist employees in paying off their student loans.

Employers can offer employees up to $5,250 as annual tax-free loan repayment benefits.

What are Employer-Sponsored Repayment Programs?

Employer-sponsored loan repayment programs are benefits private employers and certain government agencies offer to help employees pay off their student loans.

The companies can offer benefit programs as a lump sum payment or in the form of a recurring payment either to the employees or directly to the loan providers.

Eligibility and Application Process

Third-party financial institutions can offer these loan repayment programs in which they'll pay the borrowed amount directly to the loan providers.

The loan-paying organizations can also provide additional non-monetary services like refinancing bonuses and student loan counseling programs.

Taxability of the Repayment Programs

Early on, repayment programs were considered an employee's taxable income and were subject to payroll taxes. But after passing the CARES Act in March 2020 as a relief during the coronavirus pandemic, employees receiving such assistance were allowed tax breaks for up to $5,250 annually-- the tax break now lasts through 2025.

Whenever you receive loan repayment assistance through government programs, you'll not have to pay taxes on the amounts you receive.


When working for a private company offering loan repayment benefits, you must work for a specified amount before receiving such benefits. In addition, some employers offer these programs from the start.

If your current employer does not offer repayment programs, you can always look for jobs at companies that do. Alternatively, depending on your career choice, you can get repayment benefits through a federal or state government agency.

For instance, military professionals and healthcare employees can be eligible for these benefits through government agencies. It's best first to check if your career choice offers repayment programs and their eligibility criteria.

Types of Repayment Programs

Typically, repayment programs do not have a set structure or rules. However, here are some of the types of repayment programs an employer may offer.

  • Tied to retirement savings. Employer retirement contributions like a 401(k) typically match the amount an employee sets aside for retirement. Some employers may contribute towards retirement if you put aside the same amount towards the student loan payment instead.
  • Swap programs. Some employers may allow you to swap other benefit payments towards student loan payments. For instance, employers can allow employees to apply unused paid time off towards student loan repayment instead of carrying it over to the following year.
  • Cash payment programs. Some employers can pay a fixed amount in cash on top of your existing loan payments.
  • Payment match programs. Similar to cash payment programs, your employer can match your loan payment amounts.
  • Signing bonus. Some companies offer a lumpsum amount as a signing bonus when you first start a company. You can use the payment to pay off your student loans.

Benefits and Limitations

Some benefits of employer-sponsored repayment programs are:

  • The employer pays a part of the student loan.
  • The amount of loan assistance received can be allowed for tax breaks of up to $5,250 per the CARES Act of 2020.
  • Employers who offer loan repayment programs can easily attract and retain talent.

However, there are still some limitations for employer-sponsored repayment programs, like the following:

  • Employer-sponsored loan repayment benefits are available at an employer's discretion. When your employer is not currently offering the benefit, your only solution is to look for a company that does. Alternatively, you can look at government agencies, both at the federal and state level, that provide loan repayment benefits based on your career choice.
  • The loan repayment option allows for a tax break of up to $5,250 based on the CARES Act of 2020. Any amount paid over the amount mentioned above would attract the usual payroll taxes.


Student loan repayment benefits have become more popular since the inception of the CARES Act of 2020, which allows employers to offer tax-free student loan repayment benefits up to $5,250 until 2025.

When you are currently looking for a job, choosing one that offers student loan repayment benefits will be best to help you pay your loans faster. When you are already working under an employer who offers such benefits, it makes sense to know how the program works so you can maximize them.