Since 2020, the ability for employers to make tax-free contributions toward employees’ student loan repayments has fueled the growth of employer-sponsored student loan assistance programs. However, this tax-free provision is currently set to expire in December 2025.

Here’s the good news: A provision in the Domestic Policy Bill—officially known as the “One Big Beautiful Bill” (OBBB)—proposes to make these employer-paid student loan contributions permanently excluded from employees’ taxable income. This is a significant development, especially as more job seekers prioritize student loan support when evaluating potential employers.

Additional Student Loan Provisions from the Bill

The OBBB also includes a proposal to index the current $5,250 annual income exclusion for education assistance programs (which covers both tuition assistance and student loan repayment benefits) to inflation. This would help maintain the value of the benefit over time.

Beyond the tax treatment to the employer student loan provision the bill proposes other changes to the federal student loan system including:

• Simplified Repayment Options:
  The bill would eliminate all existing repayment plans and replace them with two options:

What’s Next?

The One Big Beautiful Bill (H.R. 1) is a comprehensive tax reform package that includes changes to individual, business, and energy tax provisions. While these student loan-related changes are still proposals, the bill has already passed the House and is currently under review and debate in the Senate. It may undergo amendments before a final vote. If passed, it will be sent to the President for signature and, once signed, will become law.

Reference: Text - H.R.1 - 119th Congress (2025-2026): One Big Beautiful Bill Act | Congress.gov | Library of Congress