Student Loan Assistance Strategies for Employers — 2025 Update

Nate Moody, CPFA
August 2025

Student debt remains one of the biggest barriers to financial wellness and retirement savings. The policy landscape has also shifted in employers’ favor. Two changes matter most:

  • Congress made employer student loan repayment under Section 127 a permanent, tax-free benefit, with future inflation indexing.
  • SECURE 2.0 allows 401(k), 403(b), 457(b) and SIMPLE plans to “match” employees’ qualified student loan payments starting with 2024 plan years, with IRS interim guidance in place.

Together, these provisions let you help employees pay down debt without forcing them to choose between loans and retirement.

What’s new (and why it matters)

1) Section 127 student loan repayment is now permanent.
Employers can now permanently reimburse or directly pay employees’ student loans tax-free through a Section 127 educational assistance plan. The $5,250 annual cap, long unchanged, will be indexed for inflation beginning after 2026, removing the “sunset” risk that kept many employers on the sidelines.

Why it matters: predictable, long-term tax treatment makes program design and budgeting easier. It also strengthens recruiting and retention in a tight labor market.

2) SECURE 2.0 student-loan “match” is live.
Plan sponsors may treat an employee’s qualified student loan payments as if they were elective deferrals for the limited purpose of receiving employer matching contributions. IRS Notice 2024–63 provides interim rules on eligibility, employee certification, timing, and special nondiscrimination relief.

Why it matters: employees can reduce debt and still accrue retirement savings, addressing one of the reasons people don’t increase deferrals: lack of cash flow. Early adopters have seen retention benefits with similar designs.

Plan Design to Consider in 2025

Option A: Section 127 Student Loan Repayment (SLR) plan

  • Structure: add student loan repayment to your existing Section 127 plan or create a new one. Cap at $5,250 per employee per year, indexed after 2026. Payments can be monthly or in lump sums.
  • Tax treatment: employer payments are tax-deductible; employees exclude up to the cap from income.
  • Use cases: recruitment for early-career roles, high-debt occupations, and DEI goals tied to wealth-building.

Option B: SECURE 2.0 “QSLP match” in the retirement plan

  • Definition: In order to be considered a QSLP: the repayment must be for a “qualified education loan,” which is a loan incurred by the worker to pay qualified higher education (QHE) expenses. QHE expenses are limited generally to the tuition cost of the worker, the worker’s spouse or the worker’s dependent attending an eligible educational institution.
  • Structure: employees certify their Qualified Student Loan Payments (QSLPs); you deposit matching contributions to the plan using your standard match formula.
  • Admin notes: follow IRS rules for certification, timing, and reasonable procedures; leverage special nondiscrimination relief where needed. Coordinate with your recordkeeper for workflows and attestations. 
  • Use cases: improve participation and savings rates without requiring employees to divert cash from debt repayment.

Option C: Pair them for impact

  • Combine a modest Section 127 repayment with a QSLP match to tackle debt and retirement simultaneously. Align eligibility, service requirements, and communications so employees understand the tradeoffs and timing.

Implementation Checklist

  • Choose your path: 127 SLR, QSLP match, or both. Map costs and headcount eligibility.
  • Confirm plan documents:
    • Adopt or amend a written Section 127 plan (and your tuition policy if combined).
    • Amend retirement plan for QSLP match features and coordinate with your recordkeeper.
  • Set procedures: employee certifications, loan types eligible, payment frequency, maximums, and required notices. Consider annual re-certification.
  • Coordinate payroll and vendors: ensure proper tax exclusion coding for Section 127 and accurate capture of QSLP certifications.
  • Compliance and testing: apply the IRS’ special nondiscrimination testing relief where applicable; calendar year-end checks.
  • Measure and iterate: track uptake, demographics, retention, and retirement savings effects.

Employee Communication Tips

How Lebel & Harriman can Help

We’ll benchmark vendors, design the policy, coordinate with your recordkeeper and payroll, and build the rollout campaign so employees understand how to use the benefit. We can also model costs under Section 127, QSLP match, or a hybrid, and provide ongoing reporting.

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Securities Disclosure: Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Investment Advisory Services offered through Valmark Advisers, Inc. a SEC Registered Investment Advisor. | 130 Springside Drive, Suite 300, Akron, OH 44333–2431 | Telephone: (800) 765‑5201 | Lebel & Harriman, LLP and Lebel & Harriman Retirement Advisors are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc.

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