Internal Revenue Code Section 127 allows employers to pay student loan debt and other education expenses tax-free. By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Normally, assistance provided above that level is taxable as wages. For nearly four decades, the federal tax code has capped employer-provided educational assistance at $5,250 per year under Internal Revenue Code Section 127. That number was set in 1986 — and has never been adjusted for inflation.

In 2025 dollars, $5,250 from 1986 would be equivalent to approximately $15,520. Meanwhile, tuition and training costs have soared. The outdated cap limits how much employers can help their workers pursue degrees, certifications, and job-relevant training — the very skills our modern workforce needs most.

We, the undersigned, urge Congress to amend IRC §127 to:

• Increase the annual exclusion from $5,250 to $15,520 (the inflation-adjusted equivalent of the original amount), and
• Index the exclusion to inflation going forward so it keeps pace with rising education costs.

Updating this long-stagnant limit will:

• Encourage employers to invest more in upskilling their workforce.
• Reduce out-of-pocket costs for employees pursuing higher education.
• Strengthen the economy by supporting lifelong learning and competitiveness.

According to the Education Data Initiative:

• The outstanding federal student loan balance is $1.661 trillion; 42.5 million student borrowers have federal loan debt.
• Federal student loan debt represents 91.6% of all student loan debt; 8.43% of student loan debt is private, including $30.7 billion in refinance loans.
• The average federal student loan debt balance is $39,075, while the total average balance (including private loan debt) may be as high as $42,673.
• 11.3% of federal student loan dollars were delinquent as of 2025’s second financial quarter (2025 Q2); 1.61% of private student loans were in default as of 2024 Q1.
• The average public university student borrows $31,960 to attain a bachelor’s degree.

Source: https://educationdata.org/student-loan-debt-statistics

These figures can also be found here from the official Congress website: https://www.congress.gov/crs-product/IF10158

This reform is simple, bipartisan, and overdue.
We urge members of the U.S. House Ways & Means Committee, the U.S. Senate Finance Committee, and all members of Congress to act now — raise and index the §127 education assistance limit so that workers and employers can continue learning and growing together.

#update127 #WorkforceEducation