CARES Act Allows Tax-free Student Loan Assistance

Section 127 of the Internal Revenue Code already allows employers to pay up to $5,250 per year toward employees’ qualified educational expenses—such as for tuition and textbooks—on a tax-free basis. The new CARES Act provision temporarily expands that law to include student-loan repayment assistance as qualified educational expenses.

Under this provision, employer payments toward their employees’ qualified educational loans between March 27, 2020, and Dec. 31, 2020, may be excluded from the employees’ taxable income, resulting in tax advantages for both parties.

Refer to the attached Compliance Bulletin for details.

CARES Act Allows Tax-free Student Loan Assistance