Strengthening and Expanding Employer-Provided Education Assistance:
Committed to Preserving and Strengthening Employer-Provided Educational Assistance
The Section 127 Coalition represents a diverse array of organizations, including trade associations, higher education institutions, and private employers. all dedicated to preserving and strengthening employer-provided educational assistance.
Section 127 of the Internal Revenue Code plays a critical role in maintaining U.S. competitiveness and preventing the accumulation of student debt by enabling employers to fund the training, development and education of their employees, without imposing tax burdens on those employees for the education they receive.
What is Section 127?
Section 127 of the Internal Revenue Code allows employees to receive up to $5,250 per year in educational assistance from their employer for eligible education-related expenses, such as tuition or student loan assistance, as a tax-free benefit. This provision incentivizes employees to take advantage of employer-funded education and loan repayment opportunities without the concern of a tax penalty for doing so. The section enables employers to invest in their employees’ education, simplifies the tax code, prevents the accumulation of student debt, reduces administrative burdens, and encourages upward mobility within a company.
Enacted in 1978 as a pilot program, Section 127 offered tax-free educational assistance to employees. Despite widespread support from business, education, and labor groups, the annual benefit amount remained unchanged for over three decades. During this time, advocates worked diligently to secure the program’s permanence and potential expansion.
In 2012, Section 127 was made permanent under economic stimulus legislation. With this milestone achieved, the Section 127 Coalition shifted its focus to enhancing the program. However, efforts to expand the benefit faced resistance in Congress, as tax reform initiatives prioritized broad rate reductions over individual benefits like Section 127.
Section 127 Coalition Mission Statement:
Today’s competitive workforce commands comprehensive employer-sponsored benefits packages to attract and retain top talent as well as develop talent pipelines.
The Section 127 Coalition, co-chaired by the Society for Human Resource Management (SHRM) and the National Association of Independent Colleges and Universities (NAICU), aims to preserve and strengthen employer-provided educational assistance.
The Section 127 Coalition believes that providing tax-free educational assistance is important for working students pursuing their educational goals and an important tool for employers to attract the best employees, positioning the U.S. economy to compete globally by building a skilled workforce.
Why Strengthening & Expanding Section 127 Matters:
Approximately 43.8 million borrowers carry federal student loan debt, with an average balance of $37,338. Encouraging employer-provided education assistance gives employers the tools and flexibility to support employees throughout their educational journey and into their career.
Tax-free education assistance is crucial for enhancing upskilling and reskilling opportunities, developing talent pipelines, and enabling employers to attract and retain top talent. This, in turn, helps position the U.S. to compete globally by building a skilled and educated workforce.
43.2
million borrowers carry federal student loan debt, with an average balance of $37,088. Source: Education Data Initiative
57%
of organizations offer tuition assistance as a benefit to their employees. Source: SHRM 2024 Talent Trends Survey
73%
of employees would be interested in utilizing a 100% funded education assistance program, but this number plummets to just 39% if an employee must pay taxes on any amount of these benefits above $5,250. Source: Instride
40%
of organizations that currently offer educational assistance benefits are likely to expand their offerings if there was an increase to the annual $5,250 limit under Section 127. Source: SHRM 2024 Talent Trends Survey
Section 127 Coalition Policy Priorities:
The Section 127 Coalition supports the following principles to modernize Section 127:
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Increasing the benefit limit and indexing it to inflation.
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Making permanent the 2020 inclusion of employer-sponsored student loan repayment as an allowable benefit, currently set to expire at the end of 2025.
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Adding education-related tools and technology as allowable education expenses.
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Including spouses, dependents, and gig workers as eligible beneficiaries.
The Section 127 Coalition supports the following legislation to expand Section 127:
The Upskilling and Retraining Assistance Act (H.R. 6401/S. 3296):
This bipartisan legislation, introduced by Representative Danny Davis (D-IL-07) and Sen. Maggie Hassan (D-NH) would temporarily increase the dollar threshold from $5,250 to $12,000 for two years for both undergraduate and graduate coursework, and would expand the eligible education expenses including hand tools and construction equipment, internet access, virtual reality tools, licensure fees, and computer equipment.
The Upward Mobility Enhancement Act (H.R. 6402):
This bipartisan legislation, introduced by Representative Randy Feenstra (R-IA-04) would permanently increase the tax-free educational assistance limit. This bill would raise the limit from $5,250 to $12,000 for undergraduate coursework only. Furthermore, the bill proposes indexing the benefit amount to inflation, ensuring automatic adjustments for rising costs.
The Employer Participation in Repayment Act (H.R. 9164/S. 4778):
This bipartisan legislation introduced by Sen. Mark Warner (D-VA), Sen. John Thune (R-SD) in the Senate and the House by Rep. Scott Peters (D-CA-50) and Rep. Nicole Malliotakis (R-NY-11), would permanently enable employers to voluntarily provide up to $5,250 of tax-free, student loan repayment educational assistance as a benefit to their employees under Section 127 of the IRS Code.
SHRM Responds to H.R. 6401/S. 3296 & H.R. 6402:
We applaud Congressman Davis and Congressman Feenstra for their leadership on this important issue. SHRM has long championed policies that allow employers to offer education assistance programs relevant to the modern workforce. The world of work is in a state of transformation, and our reskilling and upskilling programs must keep pace. SHRM fully supports this bipartisan effort as a powerful tool to expand skills training opportunities, and we will do all we can to help move this legislation forward. Congress can send a clear signal that the US government backs American employers and employees by passing this legislation and making these changes permanent
NAICU Responds to H.R. 6401/S. 3296 & H.R. 6402:
The National Association of Independent Colleges and Universities (NAICU) would like to thank Rep. Feenstra and Rep. Davis for your leadership on important legislation that will more than double the annual tax-free benefit employers can provide employees to assist with tuition or student loan repayment expenses under Sec. 127 of the IRC. We overwhelmingly support the Upward Mobility Enhancement Act and the Upskilling and Retraining Assistance Act that will increase the annual benefit amount from $5,250 to $12,000. This increase is long overdue and is important for working students pursuing their educational goals, and for employees repaying student loans. Expanding Sec. 127 will also help employers attract the best employees and position the U.S. economy to compete globally by building a skilled workforce,
SHRM Responds to the Employer Participation in Repayment Act (H.R. 9164/S. 4778):
SHRM is proud to support the Employer Participation in Repayment Act, a bipartisan bill that would permanently allow employers to help employees pay off their student loans. SHRM has long championed policies that allow employers to offer education assistance programs that meet the needs of today’s workforce. This legislation would benefit millions of Americans who are struggling with student loan debt, while simultaneously providing employers with a strategic advantage in attracting and retaining top talent in a competitive job market.
NAICU Responds to the Employer Participation in Repayment Act (H.R. 9164/S. 4778):
The National Association of Independent Colleges and Universities (NAICU) is pleased to support bipartisan legislation that would make permanent the expansion of IRC Sec. 127. This expansion to allow student loan repayment assistance should absolutely be a permanent benefit and not expire next year as currently scheduled. This assistance helps working students, employers, and ultimately the U.S. economy. Section 127 benefits play a critical role in maintaining U.S. competitiveness and preventing the accumulation of student debt by enabling employers to fund the training, development and education of their employees, without imposing tax burdens on those employees for the education they receive. Employees use these benefits to pursue their educational and career goals and use amounts provided by their employer to either help pay for the cost of tuition or repay student loans.