Student Loan Stipends for Employees: How They Work

A student loan stipend is an employer-provided cash payment that helps employees pay off their student loans.

Last updated by Sarah Bedrick


45 million Americans have federal student debt, and more than half of today's college students will graduate with loans to pay off.

For many, it's a necessary evil. They use the money to pay expensive tuition fees, which land them a degree they can use to land a job at a company like yours. But, this leaves many of them with a significant financial burden after graduation.

Including student loan stipends in your benefits package is an easy and low-cost way to support those who worked hard to earn their degree and chose your company as their employer.

In this guide, we'll cover...

  • What is a student loan stipend?
  • How student loan stipends work
  • Why offer student loan payment assistance?
  • How top companies help their employees pay off their student loans
  • Tax implications for student loan stipends
  • How to offer a student loan stipend

What is a student loan stipend?

First, a brief definition:

A student loan stipend is an employer-provided cash payment that helps employees pay off their student loans.

These funds are typically paid out on a recurring (monthly) basis or as a lump sum (annually). You can choose to offer a fixed amount or match your employee's payments up to a certain limit. Like other perk stipends, you can also standardize the payment amount across your organization or vary it from one employee to the next.

Employers typically offer student loan stipends to...

  • new hires who recently earned their undergrad degree
  • graduate or doctoral students seeking an advanced degree while working part-time or full-time
  • current full-time employees who are still paying off their student loans

Student loan stipends are a pre-tax benefit, up to $5,250 per employee per year. This is bundled with any other student loan assistance you may provide, such as tuition reimbursement and loan consolidation programs. You cannot offer $5,250 in addition to other assistance options (more on all this later).


How student loan stipends work

Using stipend software is far and away the easiest way to help your employees with their financial aid funds.

The 3-step process is simple:

  1. Set up a platform that makes the appropriate tax deductions per employee automatically.
  2. Employees submit proof of their monthly loan payment.
  3. Employees get reimbursed through regular payroll.

You can choose to supplement the employee's payment by a fixed percentage or amount. Or, you can simply match their existing payments. Since they're so easy to set up, you can build them into your existing educational assistance program or offer them as a standalone employee perk.

Other debt repayment assistance options

Student loan stipends are a specific form of student loan repayment assistance. Your program might also include direct payments to a loan servicer for the following three sources:

  • Service-based assistance: Military members with student loan funds are eligible for loan repayment assistance through a government agency after their service or upon meeting the requirements.
  • Retirement-based assistance: Employees can receive employer-matched contributions to their retirement savings by allocating a portion of their paycheck towards student loan payments instead of retirement (more here).
  • Trade for unused vacation days: Employees can use unused vacation days to pay for student loans directly.

Other educational assistance benefits

Stipends and reimbursements are two related benefits that help employees pay for their education. While both are advantageous to your workforce, they're different beasts.

Tuition reimbursements:

  • are tax-exempt for $5,250 per employee each year
  • only cover education expenses directly related to coursework or classes
  • are paid after the course is completed and a final grade is received
  • take place during or directly after the school year (while the employee is still in school)

Student loan stipends:

  • are tax-exempt up to $5,250 per employee each year (minus the amount of tuition reimbursement, if any)
  • apply only to the student loan money, which includes interest and principal payments
  • are paid monthly or annually
  • take place after a student has completed their education

Why offer student loan payment assistance?

College costs an astronomical amount unfathomable to the 30-, 40-, and 50-somethings in charge of today's companies. According to the most recent data from The College Board, the average cost of tuition and fees at a public 4-year university in 2021-2022 was $10,740 (in-state) and $27,560 (out-of-state). With those numbers, the typical 4-year degree costs $42,960 for in-state attendees or $110,240 for out-of-state ones.

These numbers don't factor in living expenses (which are even higher for students required to live on-campus). The average cost of room and board currently sits at $12,111 per year, which, if you're in-state, is more than the cost of the education itself.

Between classes and living expenses, student loans are the only option for anyone without tens of thousands in their bank account (or a relative who does).

If the numbers aren't convincing enough, here's a holistic look at why many top companies offer student loan stipends:

Student loan assistance is a win for you and your employees.

If you're wondering, "How many people actually take out student loan funds?!" the answer is, "A lot. At least 1 in 2." Of the 54% who graduate with debt, they're looking at $29,100.

A survey by YuLife and YouGov revealed that 80% of US-based workers say financial stress negatively affects their performance. Enhancing employees' financial well-being boosts your workplace's appeal. 66% of US working adults consider a company's support for their financial well-being when applying for a job there.

In addition to attracting the best talent, student loan stipends also help you retain current ones. Money isn't the only reason people change jobs, but it's the most important deciding factor for those looking at a mountain of debt.

Employers who offer student loan assistance gain a unique advantage in the war for talent; it's an easy way to set yourself apart from competitors and build a loyal, satisfied workforce. Investing in your employees' education also has intangible benefits like increased employee morale, engagement, and productivity.

student loan stipend

Ready to offer a student loan stipend?

Help your employees tackle student loan debt and promote the financial wellness of your workforce.


Top companies help their employees pay off their student loans

Thanks to the 2020 CARES Act (and Consolidated Appropriations Act extension), offering student loan stipends is a no-brainer. Now, almost 1 in 5 employers offer repayment assistance. An additional 31% say they plan to by the end of 2023.

Here's a look at how some well-known employers help their employees with their debt:

  • Aetna has been offering student loan assistance since 2019.
  • Chegg offers entry-to-manager-level employees $5,000/year towards student loan repayment and $3,000/year for Directors/VPs.
  • Estée Lauder offers a stipend of $100/month, up to $10,000 total for eligible employees.
  • Fidelity also offers up to $10,000 (lifetime) and reports saving its employees over $38 million in debt since launching the program.
  • Google offers up to $2,500 per US-based employee toward student loans.
  • Hulu offers $1,200 annually for its employees' student loan funds.
  • Live Nation offers $100/month up to $6,000 for all full-time employees after six months with the company.
  • SoFi offers its employees $200/month in stipend reimbursement after its own internal research showed 90% of respondents would be more likely to accept a job with this benefit.

Tax implications for student loan stipends

  • Until December 31, 2025, employers can provide each employee $5,250 of tax-free student loan assistance per year.
  • Payments to the lender or the employee qualify.
  • This applies to all loan options, including federal student loans and private student loans.
  • The $5,250 amount is a cumulative total. So, if you've already reimbursed an employee for $3,000 in tuition this year, you can only provide them with up to $2,250 more in tax-free student loan payments.
  • Under your education assistance program, other stipends can be used to pay other expenses associated with school attendance.
  • After December 31, 2025, employers won't receive a tax break for helping employees pay off their private or federal financial aid debt.
  • Compt is 100% tax-compliant, so it's easy to disburse the loan money through payroll, track expenses, and make appropriate deductions.

How to offer a student loan stipend

On the surface, taxes, percentages, and confusing terminology are a lot to take in. But offering a student loan stipend is simple.

1. Determine when and how you'll pay.

The two main ways you'll pay out your stipend are annual lump sum and recurring monthly payments.

  • Lump sum payments are best for highly compensated employees like directors, VPs, and above.
  • Monthly payments are better if you want to scale your student loan stipend program companywide.

Most organizations begin by offering $50 to $100 per month per employee. This might seem small, but as we saw earlier, it can make a huge impact on employees' financial well-being.

2. Specify eligibility criteria and contingencies.

You'll want to include a clause in the Terms and Conditions governing your stipend program that outlines the eligibility criteria.

  • Time employed with the company. You may want to condition access to the stipend on a minimum length of employment (e.g., six months or more).
  • Employment status. Most employers extend this benefit to full-time employees exclusively. If you work with a lot of contractors, it might be a good idea to include anyone working 30+ hours per week.
  • Nondiscrimination laws. Ensure your criteria are inclusive — avoid discrimination based on protected classes like gender, age, religion, or national origin.

The nice thing about stipends vs. other forms of financial assistance is your employees take care of the payment. You don't have to worry about private lenders or their school's financial aid office. So, you can maximize eligibility without creating a massive back-office headache.

3. Set your maximum contribution (≤ $5,250).

Some companies pay as much as they can while still receiving the tax break for doing so. Others don't have the budget for $5,000+/year, so they offer a smaller amount. Some employers even match the employee's contribution, up to a certain maximum limit. With a stipend, you have flexibility here.

No matter what you do, it's best to keep your max amount below the $5,250 threshold. Otherwise, you could wind up paying taxes on accidental overages.

4. Notify your employees and promote the program.

Maximize employee enrollment by announcing your new program with a company-wide email, on your website, and in all-hands meetings.

For your future employees, make sure hiring managers know to include information about this benefit during the interview and job offer process.

5. Disburse through payroll!

Using Compt, it's really easy to get these stipends out via payroll. We'll integrate with your payroll and accounting tools, which makes the entire process nearly automatic. Since you can set eligibility guidelines ahead of time, you can onboard new employees without additional hoops to jump through.

Sarah Bedrick

Chief Marketing Officer

Prior to Compt, Sarah worked at HubSpot for 6+ years, where she helped to build, scale, and grow the HubSpot Academy division. She is obsessed with understanding what makes a company culture great, being a career and life coach to people in tech, and creating cherished memories with her husband and two young kids. Her favorite Compt stipend category is Health & Wellness.


Ready to offer student loan stipends to your employees?

Help your employees tackle student loan debt and promote the financial wellness of your workforce.

Your cart