Ask an advisor: How can I get my job to pay my student debt?

Ask an advisor: How can I get my employer to pay my student loans?

January 2, 2025 5:03 PM

Educational assistance programs can offer a lifeline to employees mired in student debt.

Welcome back to "Ask an Advisor," the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.

For Americans with student debt, the past four years have been a roller coaster.

First there was a Covid-era pause on student loan payments — but that expired. Then President Joe Biden signed an executive order forgiving $430 billion in student debt — but the Supreme Court overruled it. Then Biden introduced the SAVE (Saving on a Valuable Education) plan, which made repayment cheaper for millions of borrowers — but federal courts blocked it, and the Supreme Court declined to save it.

But for some borrowers, one lifeline is still available: educational assistance programs (EAPs). This benefit is offered not by the Biden administration, but by the IRS, and is paid not by the government, but by employers.

Under the U.S. tax code, employers can choose to pay for their workers' educational expenses — including student loans — and the money is not taxed. For a borrower, that can mean up to $5,250 per year in loan payments, either as part of their salary or in addition to it. Even if the money is subtracted from their pay, that's a better deal for the employee, because it goes directly to their loans without taking a hit from income taxes.

But that's only if the company offers it. One borrower in New York wants to persuade her employer, a law firm, to provide this assistance. And like a good lawyer, she's doing her research before she makes her argument — by talking to financial advisors.

Here's what she wrote:

Dear advisors,

I have significant student debt, and I think I've found a way my employer could help — but I still need to sell them on it.

I'm a lawyer in New York, and I recently learned about educational assistance programs. Using one of these programs would help me pay down my loans faster, and it wouldn't cost my firm much to implement it.

My question is, what are the benefits to an employer like mine — a limited liability partnership (LLP) — for signing on to such a program? I want to persuade my firm to offer this benefit, and I need all the information I can get. Or is there something better than an EAP that I should consider?

Thanks in advance!

Sincerely,  

Mired in Manhattan

And here's what financial advisors wrote back:

A win-win opportunity

Noah Damsky, chartered financial analyst and founder of

Marina Wealth Advisors

in Los Angeles

The benefit to your employer is that it's effectively a pay raise for you without giving you more money. Now the trick is how you can sell that to your employer, since it'll take time and resources on their part.

Perhaps you have other colleagues in the same position, so consider recruiting others to also bring this up with HR. You'll want to articulate how it's valuable to employees (and the employer, by increasing employee satisfaction), since it is effectively a pay raise without more money from your employer.

Although it's a win-win opportunity for you and your employer, keep in mind that there are limitations. For example, employers can only offer up to $5,250 per year pre-tax toward your student loan repayment.

Spell it out

Thomas Scanlon, certified financial planner at

Raymond James

in Manchester, Connecticut

Yes, EAPs are an effective tool. However, when making the presentation to your employer, you should convey the total package.

To have an EAP, this program must not be discriminatory. In other words, it should broadly cover most of the full-time employees at the firm. It can't just cover all of the partners or highly compensated folks at the firm.

Next, the plan must be in writing. It should spell out who is eligible and what documentation is required and when payments will be made. Keep in mind, for 2025, the most that can be paid out tax-free is $5,250 [per employee]. Any amounts paid over this amount is taxable income.

So ask your employer if they would be interested in this. If there is any interest at the firm, they will walk down to the accounting department and ask, "What will this cost us?"

In your pitch, present this as a benefit to prospective employees and as a retention tool for existing employees.

Also, if you are currently not maximizing your contributions to your 401(k) plan, do so — and to your HSA plan, if applicable. These tools will provide you with a lower income tax and save for your future.

The clock is ticking

Ryan Derousseau, CFP at

United Financial Planning Group

in Hauppauge, New York

EAPs are an option through the end of 2025. After that, the ability for companies to pay student loans this way is set to sunset (along with many other tax laws). It's still unclear whether or not this feature will continue under any potential tax changes with the new administration and Congress.

But, for this year, the benefit is clear: Employers create a retention tool that is tax-free for the employee and tax-deductible for the employer. This is true as long as the benefit doesn't surpass $5,250 per year. The EAPs can actually be set up in a way where the employer matches a certain amount of debt repayment based on how much the employee pays back the debt, similar to a 401(k). There are a ton of rules around this — again, similar to a 401(k) — but it's an option for the business.

For the benefit to your employer, focus on the intangibles: It's a retention and recruitment tool to attract and retain the best young talent. Since many young lawyers will have student debt, it's a way to stand out to potential hires. They can also set certain requirements to qualify, like tenure, to ensure the company is truly incentivizing the right talent.

The other ways I know to pay for student loans, off the top of my head, are just greater signing bonuses or ongoing performance bonuses. But that isn't as direct as the value of an EAP, nor as tax-friendly, which can go straight to paying down the student loans.