Tax Tip 2025-59: Employers may help with college expenses through educational assistance programs

IRS Tax Tips

Sept. 2, 2025

Issue Number: Tax Tip 2025-59

Employers may help with college expenses through educational assistance programs

Employers can continue to use educational assistance programs to help employees with undergraduate or graduate-level student loan debt and other education expenses tax-free.

Eligible expenses
Educational assistance programs can help pay for:

Books
Equipment
Supplies
Tuition and other fees
Qualified education loans

Loan payments
These programs can be used to pay principal and interest on an employee's qualified education loans.

The option is available only for payments made after March 27, 2020.

Payments can be made directly to the educational provider, lender or directly to the employee. By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year, as adjusted for cost-of-living for tax years beginning after 2026. Normally, assistance provided above that level is taxable as wages.

For other requirements, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Chapter 10 in Publication 970, Tax Benefits for Education, provides details on what qualifies as a student loan.

Ineligible expenses
Educational assistance benefits do not include payments for the following items:

Meals, lodging or transportation.
Tools or supplies other than textbooks that the student can keep after completing the course of instruction. For example, educational assistance doesn’t include payments for a computer or laptop that the taxpayer can keep.
Courses involving sports, games or hobbies unless they:

Have a reasonable relationship to the business of the employer, or
Are required as part of a degree program

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Issue Number: Tax Tip 2025-59