Employers can provide up to $5,250 per year in tax-free educational assistance to employees through a qualified educational assistance program (QEAP), which must be outlined in a formal written plan and made available to all eligible employees. Unlike work-related education benefits, QEAPs can cover non-job-related education, offering broader flexibility. The CARES Act temporarily allowed employers to use this benefit to cover student loan repayments through the end of 2020, and the Consolidated Appropriations Act later extended that provision through 2025.
The OBBB now makes this student loan repayment feature a permanent part of QEAPs and introduces annual increases to the QEAP current limit of $5,250 beginning in 2026. The $5,250 cap has remained the same since 1979.
Employer Action Items
Amend your §127 educational assistance plan to include student loan repayment benefits and prepare for the indexed increase to the $5,250 annual limit beginning in 2026.