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Picture graduating from college and landing a job that offers a good salary, health benefits, a retirement package — and your employer will help pay off your student loans.

More and more companies are jumping on this bandwagon, sponsoring benefit programs to help repay their employees’ student loans. With student loan debt ballooning to more than $1.5 trillion, the benefits of student loan repayment assistance are clear on both ends: Employers get the leverage they need to attract and retain millennial talent, and new hires find professional advancement and help on their student debt.

But there is one drawback: Under the current tax laws, employer student loan repayment is taxable. Like your paycheck, it’s counted as income and subject to income tax, meaning there could be tax consequences of an employer paying student loan debt.

Does this mean that accepting student loan help isn’t worth it? Not necessarily. Offsetting the tax burden may be possible with smart student loan decisions, and some proposed congressional legislation may eventually allow companies to contribute tax-free to help employees repay their student loans.

Let’s take a look at:

How job-sponsored student loan payments work

Currently, only 8% of companies offer employer student loan repayment assistance, but that’s up from just 4% a year ago, according to a survey by the Society for Human Resource Management. Companies that do offer this benefit generally allocate a certain amount of money from their budgets for employees with student loans.

Here are some examples of high-profile companies that offer student loan repayment benefits:

Fidelity Investments offers a $2,000 reimbursement package distributed over five years to employees who pass the six-month mark at the firm. Employees can receive up to $10,000 per borrower towards student loan repayments. So far, more than 9,000 employees have participated in the benefit.

offers a $2,000 reimbursement package distributed over five years to employees who pass the six-month mark at the firm. Employees can receive up to $10,000 per borrower towards student loan repayments. So far, more than 9,000 employees have participated in the benefit. Education technology company Chegg disburses up to $5,000 a year to entry-level and manager-level employees in the U.S. for student loan repayment, while more senior employees can receive up to $3,000 annually, funded through selling shares set aside for employees. As a separate benefit, employees can receive up to $1,000 per year in cash for debt repayment.

disburses up to $5,000 a year to entry-level and manager-level employees in the U.S. for student loan repayment, while more senior employees can receive up to $3,000 annually, funded through selling shares set aside for employees. As a separate benefit, employees can receive up to $1,000 per year in cash for debt repayment. PricewaterhouseCoopers ’ student loan paydown plan gives employees the chance to receive $1,200 a year toward student loan debt, up to $10,000. The company says the benefit helps shave up to three years off student loan repayment.

’ student loan paydown plan gives employees the chance to receive $1,200 a year toward student loan debt, up to $10,000. The company says the benefit helps shave up to three years off student loan repayment. Global asset management company Natixis offers workers $1,000 immediately to use toward student loan debt, along with $83.33 per month paid directly to the student loan servicer. The benefit maxes out at $10,000 over a 10-year period, as long as the individual is still an employee during the duration.

offers workers $1,000 immediately to use toward student loan debt, along with $83.33 per month paid directly to the student loan servicer. The benefit maxes out at $10,000 over a 10-year period, as long as the individual is still an employee during the duration. Aetna offers student loan repayment assistance to employees with eligible loans that meet company guidelines. It will start providing a $2,000 annual match for employee student loan payments, maxing out the benefit at $10,000. To be eligible, employees must work at least 20 hours per week.

Beware the tax consequences of employer student loan repayment

Don’t confuse student loan repayment with tuition reimbursement. Tuition reimbursement is offered to employees who are taking classes while they are working. Under IRS rules, if your employer provides up to $5,250 annually in educational assistance for undergraduate or graduate-level courses, it is tax-deductible.

Student loan repayment is a different story. For now at least, employer student loan repayment is taxable. You’ll need to claim any amount on your tax return if your employer compensates you for your loans, no matter what the company policy or payout is. Considering that it qualifies as taxable, it would technically be closer to a salary bonus than a benefit.

All that may change if the Employer Participation in Repayment Act of 2019, currently working its way through Congress, is passed. The bill, sponsored in the Senate by Sen. Mark Warner (D-Va.) and Sen. John Thune (R-S.D.) and in the House by Rep. Scott Peters (D-CA), would amend existing tax code to allow employers to give tax-free student loan assistance up to $5,250 a year per employee.

How to make sure you benefit from student loan repayment

While proposed legislation winds its way through Capitol Hill, don’t let tax fears discourage you from participating in an employer-backed student loan assistance program. If you’re concerned that you’ll end up paying more in taxes to the IRS compared with what you’d likely save in student loan payments each month, consider the following:

Tax rates and potential savings depend on your finances

Minimizing the tax hit will depend on several factors, like the interest rate and terms of your student loans, your salary and the structure of your employer’s student loan assistance program. Crunch some numbers to see if you’ll come out ahead of the tax liabilities by receiving student loan benefits from your employer.

Some programs are already tax-free

Some public sector student loan repayment programs are tax-exempt, including the National Health Service Corps Loan Repayment Program, the Public Service Loan Forgiveness program and other similar loan repayment or forgiveness programs. If you choose a position in a qualifying program or field that already offers loan repayment or forgiveness, then you don’t have to factor employer contributions into your decision-making when accepting a position. With the money you’re saving on loan repayment, you may be able to direct more funds into your retirement savings account.

Refinancing can save you even more

Student loan refinancing can provide borrowers with a lower interest rate, better repayment terms and higher quality service. Combine it with repayment assistance from your employer, and you could come out on top financially. Just remember, once you refinance federal loans, you permanently lose access to the various federal aid programs, such as income-driven repayment plans and Public Service Loan Forgiveness.

Research potential employers’ student loan repayment policies

When considering potential employers, recent grads are increasingly looking for loan repayment assistance as a benefit. A Student Loan Hero survey found that nearly 39% of students said it was a very important or extremely important benefit. Future employers who reimburse student loans may be ahead of the curve on the tax-savings front.

Some companies have begun partnering with startups like Student Loan Genius, whose student loan 401(k) contribution feature links retirement savings to student loans. With the feature, companies can contribute pretax dollars to an employee’s retirement account each time the employee completes a student loan payment.

Consider your retirement

There’s a less-obvious benefit of working with an employer who will contribute to your student loans: The faster you pay off your student loans, the sooner you can really tackle your retirement contributions.

Next steps

For now, prioritize your student loan payments and weigh the pros and cons between the benefits you’re likely to receive against the taxes you’ll need to pay. A student loan repayment assistance program can help you get a leg up on your finances while also advancing your career. The number of companies offering this benefit is growing, and Student Loan Hero’s tools can help you search for participating employers.

By keeping abreast of emerging companies participating in student loan payment programs, as well as pending legislation, paying off your balance and reducing debt are just a few ways to get your job to work for your loans.

Alli Romano contributed to this report.

The information in this article is accurate as of the date of publishing.

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