Navigating Compliance and Tax Advantages of Student Loan Repayment Benefits

For nonprofit healthcare systems, attracting and retaining skilled professionals is an ongoing challenge. Student debt remains a significant financial burden for many healthcare workers, particularly nurses, physicians, and other essential staff. Offering student loan repayment assistance (SLRA) as an employee benefit is a powerful recruitment and retention tool. However, CFOs must balance this offering with financial sustainability and compliance considerations.

Thanks to provisions in the CARES Act, nonprofit healthcare organizations can now provide student loan repayment benefits in a tax-advantaged way—giving employees much-needed relief while optimizing employer contributions. Understanding these tax incentives and compliance requirements can help CFOs design a financially sound SLRA program that supports both workforce stability and the organization’s bottom line.

The Tax Advantage: CARES Act Provisions for Student Loan Repayment

The Coronavirus Aid, Relief, and Economic Security (CARES) Act introduced a provision that allows employers to contribute up to $5,250 per employee per year toward student loan repayment on a tax-free basis. This benefit, which has been extended through December 31, 2025, is structured similarly to tuition assistance programs.

For nonprofit healthcare employers, this means:

• Contributions up to $5,250 annually per employee are not subject to federal income tax for employees.
• Employers also receive payroll tax exemptions on these contributions.
• The tax-exempt status helps reduce the financial impact of offering this benefit, making it a cost-effective recruitment tool.

Strategic Implementation for CFOs

To maximize the impact of student loan repayment benefits while maintaining financial sustainability, CFOs should consider the following strategies:

1. Align SLRA with Talent Retention Goals

• Focus benefits on roles with high turnover or critical staffing shortages, such as nurses and primary care providers.
• Structure repayment contributions over multiple years to incentivize long-term retention.

2. Utilize Tax-Free Status for Cost Efficiency

• Ensure contributions fall within the $5,250 annual tax-free limit to maximize savings.
• Work with HR and legal teams to structure the program in compliance with IRS guidelines under Section 127 of the Internal Revenue Code.

3. Explore Funding Models for Sustainability

• Consider tiered contribution levels based on tenure or job classification.
• Leverage public service loan forgiveness (PSLF) education to help employees reduce long-term debt burdens while minimizing employer contributions.

4. Promote Awareness and Enrollment

• Clearly communicate the financial benefits of the SLRA program to employees.
• Incorporate student loan repayment benefits into recruitment marketing efforts.

Why This Matters for Nonprofit Healthcare CFOs

Beyond tax savings, offering student loan repayment benefits can enhance recruitment efforts, reduce turnover costs, and improve employee financial well-being. With the ongoing talent shortages in healthcare, strategic SLRA implementation can be a game-changer. By leveraging the tax advantages provided by the CARES Act, nonprofit healthcare CFOs can design programs that are both financially responsible and highly impactful for their workforce.

As the 2025 deadline approaches, now is the time to evaluate and implement student loan repayment benefits—ensuring compliance while maximizing long-term advantages for both employees and the organization. PeopleJoy specializes in helping hospitals design and implement tax-advantaged student loan repayment programs, making it easy to set up and manage a financially sustainable benefit for your workforce.

Get Started Today

Want to explore how your hospital can offer student loan repayment benefits while maximizing tax advantages? Contact PeopleJoy today for a consultation and take the first step toward a smarter, more effective employee retention strategy.