One of the most popular “temporary” pandemic benefits is now here to stay. The “Big Beautiful Bill” (OBBBA) permanently extends the ability for employers to make tax-free contributions toward employee student loans.
From Temporary to Permanent
Before 2020, any student loan help from an employer was treated just like wages, fully taxable to the employee. That changed under the CARES Act, which allowed employers to contribute up to $5,250 per year tax-free toward student loan balances.
Initially set to expire at the end of 2020 (and later extended through 2025), OBBBA has now made the benefit permanent. Starting in 2027, the $5,250 cap will also be indexed to inflation.
Planning consideration: This shift gives both workers and employers long-term certainty, making it easier to build student loan repayment into benefit strategies.
How the Benefit Works
Employers can provide up to $5,250 per year, per employee, to pay down either federal or private student loans. Payments can be made directly to the loan servicer or reimbursed to the employee.
- Tax-free to employees: The payments don’t count as income.
- Payroll tax savings for employers: Companies avoid payroll taxes on these amounts.
- Shared cap with tuition reimbursement: The $5,250 limit applies across both programs combined. For example, if an employer pays $3,000 toward graduate tuition and $2,000 toward loans, the entire $5,000 is tax-free. But if benefits exceed $5,250, the extra is taxable as wages.
Planning consideration: Employees cannot deduct student loan interest for amounts repaid tax-free through this program. This makes coordination between employer benefits and personal tax planning important.
Why It Matters in Boulder
With the average CU Boulder graduate leaving school with around $25,000 in student loan debt, this benefit could have a major impact locally. Boulder employers, from tech startups to professional firms, can now use student loan assistance as a permanent tool to attract and retain talent in a competitive market.
Planning consideration: For Boulder professionals balancing loan repayment with saving for retirement or a home, having an employer chip in tax-free can free up cash flow for other goals.
The Bottom Line
Student loan repayment assistance is now a permanent, tax-free employee benefit. Employers gain a flexible perk to support their workforce, and employees get meaningful relief without added tax burdens.
Boulder workers should review whether their employer offers this program, and companies may want to consider adding it as part of a broader benefits package.
