EAP Student Loan Extension

EAPs are governed by IRC Section 127. Historically, EAPs could only be used to help employees cover their current education expenses, such as tuition or books. Effective as of March 27, 2020, EAPs can also be used to help employees repay principal and interest on their existing qualified student loans. Student loans that qualify are generally those that also qualify for federal tax deduction purposes. That means the loan must have been incurred while the employee was enrolled at least half-time in the educational program and working toward a degree, certificate or recognized credential at an accredited educational institution. Employers can opt to reimburse the employee for student loan payments they have made, or they can elect to pay the student loan servicing company directly.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about whether Congress should act to extend the EAP student loan repayment option past 2025.

Below is a summary of the debate that ensued between the two professors.