such employee if the assistance is furnished pursuant to 
a program which is described in subsection (c). 
‘‘(b) QUALIFIED EMPLOYEE.—For purposes of this 
subsection, the term ‘qualified employee’ means any em-
ployee who contributes (in addition to any amount ex-
cluded from gross income under this section) not less than 
$50 per month for payment of principal and interest on 
the loans subject to the student loan payment assistance 
program. 
‘‘(c) LIMITATIONS.— 
‘‘(1) ASSISTANCE
LIMITATION.—The amount 
taken into account under subsection (a) with respect 
to an individual for student loan assistance with re-
spect to student loan payments during a taxable 
year shall not exceed $6,000. 
‘‘(2) 
EARNED
INCOME
LIMITATION.—The 
amount excluded from the income of an employee 
under subsection (a) for any taxable year shall not 
exceed the earned income of such employee for such 
taxable year. 
‘‘(d) STUDENT LOAN PAYMENT ASSISTANCE PRO-
GRAM.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion a student loan payment assistance program is 
a separate written plan of an employer for the exclu-
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sive benefit of his employees to provide such employ-
ees with student loan payment assistance which 
meets the requirements of paragraphs (2) through 
(10) of this subsection. If any plan would qualify as 
a student loan payment assistance program but for 
a failure to meet the requirements of this subsection, 
then, notwithstanding such failure, such plan shall 
be treated as a student loan payment assistance pro-
gram in the case of employees who are not highly 
compensated employees. 
‘‘(2) DISCRIMINATION.—The contributions or 
benefits provided under the plan shall not discrimi-
nate in favor of employees who are highly com-
pensated employees (within the meaning of section 
414(q)). 
‘‘(3) ELIGIBILITY.—The program shall benefit 
employees who qualify under a classification set up 
by the employer and found by the Secretary not to 
be discriminatory in favor of employees described in 
paragraph (2). 
‘‘(4) PRINCIPAL SHAREHOLDERS OR OWNERS.— 
Not more than 25 percent of the amounts paid or 
incurred by the employer for student loan payment 
assistance during the year may be provided for the 
class of individuals who are shareholders or owners 
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(or their spouses or dependents), each of whom (on 
any day of the year) owns more than 5 percent of 
the stock or of the capital or profits interest in the 
employer. 
‘‘(5) NO FUNDING REQUIRED.—A program re-
ferred to in paragraph (1) is not required to be 
funded. 
‘‘(6) NOTIFICATION
OF
ELIGIBLE
EMPLOY-
EES.—Reasonable notification of the availability and 
terms of the program shall be provided to eligible 
employees. 
‘‘(7) STATEMENT
OF
EXPENSES.—The plan 
shall furnish to an employee, on or before January 
31, a written statement showing the amounts paid 
or expenses incurred by the employer in providing 
student loan payment assistance to such employee 
during the previous calendar year. 
‘‘(8) BENEFITS.— 
‘‘(A) IN GENERAL.—A plan meets the re-
quirements of this paragraph if the average 
benefits provided to employees who are not 
highly compensated employees under all plans 
of the employer is at least 55 percent of the av-
erage benefits provided to highly compensated 
employees under all plans of the employer. 
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‘‘(B) SALARY REDUCTION AGREEMENTS.— 
For purposes of subparagraph (A), in the case 
of any benefits provided through a salary reduc-
tion agreement, a plan may disregard any em-
ployees whose compensation is less than 
$25,000. For purposes of this subparagraph, 
the term ‘compensation’ has the meaning given 
such term by section 414(q)(4), except that, 
under rules prescribed by the Secretary, an em-
ployer may elect to determine compensation on 
any other basis which does not discriminate in 
favor of highly compensated employees. 
‘‘(9) CONTRIBUTIONS
MADE
DIRECTLY
TO 
LENDER.—A plan meets the requirements of this 
paragraph if all benefits provided under the plan are 
paid directly to the holder of the indebtedness re-
ferred to in subsection (d)(1)(A)(i). 
‘‘(10) MATCHING
CONTRIBUTIONS.—A plan 
which meets the requirements of paragraphs (2) 
through (9) shall not fail to be treated as a program 
described in this subsection merely because such 
plan provides for the employer to make matching 
contributions with respect to employee contributions. 
‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
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‘‘(1) STUDENT LOAN PAYMENT ASSISTANCE.— 
‘‘(A) IN
GENERAL.—The term ‘student 
loan payment assistance’ means the payment of 
principal or interest on— 
‘‘(i) any indebtedness incurred by the 
employee solely to pay qualified higher 
education expenses (as defined in section 
221) which— 
‘‘(I) are paid or incurred within a 
reasonable period of time before or 
after the indebtedness was incurred, 
and 
‘‘(II) are attributable to edu-
cation furnished during a period dur-
ing which the employee was an eligible 
student, or 
‘‘(ii) any indebtedness used to refi-
nance indebtedness described in clause (i). 
Such term shall not include any payment of 
principal or interest on indebtedness owed to a 
person who is related (within the meaning of 
section 267(b) or 707(b)(1)) to the taxpayer or 
to any person by reason of a loan under any 
qualified employer plan (as defined in section 
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72(p)(4)) or under any contract referred to in 
section 72(p)(5). 
‘‘(B) ELIGIBLE STUDENT.—The term ‘eli-
gible student’ has the meaning given such term 
by section 25A(b)(3). 
‘‘(C) DEPENDENT.—The term ‘dependent’ 
has the meaning given such term by section 
152 (determined without regard to subsections 
(b)(1), (b)(2), and (d)(1)(B) thereof). 
‘‘(2) EARNED INCOME.—The term ‘earned in-
come’ shall have the meaning given such term in 
section 32(c)(2), but such term shall not include any 
amounts paid or incurred by an employer for stu-
dent loan payment assistance to an employee. 
‘‘(3) EMPLOYEE.—The term ‘employee’ in-
cludes, for any year, an individual who is an em-
ployee within the meaning of section 401(c)(1) (re-
lating to self-employed individuals). 
‘‘(4) EMPLOYER.—An individual who owns the 
entire interest in an unincorporated trade or busi-
ness shall be treated as his own employer. A part-
nership shall be treated as the employer of each 
partner who is an employee within the meaning of 
paragraph (3). 
‘‘(5) ATTRIBUTION RULES.— 
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‘‘(A) OWNERSHIP OF STOCK.—Ownership 
of stock in a corporation shall be determined in 
accordance with the rules provided under sub-
sections (d) and (e) of section 1563 (without re-
gard to section 1563(e)(3)(C)). 
‘‘(B) 
INTEREST
IN
UNINCORPORATED 
TRADE OR BUSINESS.—The interest of an em-
ployee in a trade or business which is not incor-
porated shall be determined in accordance with 
regulations prescribed by the Secretary, which 
shall be based on principles similar to the prin-
ciples which apply in the case of subparagraph 
(A). 
‘‘(6) UTILIZATION TEST NOT APPLICABLE.—A 
student loan payment assistance program shall not 
be held or considered to fail to meet any require-
ments of subsection (c) (other than paragraphs (4) 
and (8) thereof) merely because of utilization rates 
for the different types of assistance made available 
under the program. 
‘‘(7) DISALLOWANCE OF EXCLUDED AMOUNTS 
AS CREDIT OR DEDUCTION.—No deduction or credit 
shall be allowed to the employee under any other 
section of this chapter for any amount excluded from 
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the gross income of the employee by reason of this 
section. 
‘‘(8) TREATMENT
OF
SALARY
REDUCTION 
AMOUNTS.—Any matching contribution withheld 
from an employee under a student loan payment as-
sistance program pursuant to a salary reduction 
agreement shall be treated for purposes of this title 
as an amount paid by the employee and not as an 
amount paid by the employer.’’. 
(b) 
CONFORMING
AMENDMENTS.—Sections 
221(d)(2)(A), 414 (n)(3)(C) and (t)(2), 3121(a)(18), 
3306(b)(13), 3401(a)(18), and 6039D(d)(1) of such Code 
are each amended by inserting ‘‘127A,’’ after ‘‘127,’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter B of chapter 1 of such Code 
is amended by inserting after the item relating to section 
127 the following new item: 
‘‘Sec. 127A. Student loan payment assistance programs.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 4. DEDUCTION FOR STUDENT LOAN PAYMENTS WHICH 
ARE MATCHED BY AN EMPLOYER. 
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
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by redesignating section 224 as section 225 and by insert-
ing after section 223 the following new section: 
‘‘SEC. 224. DEDUCTION FOR STUDENT LOAN PAYMENTS 
WHICH ARE MATCHED BY AN EMPLOYER. 
‘‘(a) IN GENERAL.—In the case of an individual who 
is a qualified employee (as defined in section 127A), there 
shall be allowed as a deduction an amount equal to the 
student loan payments made by such individual with re-
spect to which an employer of such individual makes 
matching contributions under a student loan payment as-
sistance program which are excludible from the gross in-
come of such employee under section 127A. 
‘‘(b) ANNUAL LIMITATION.—The amount allowable 
as a deduction under subsection (a) with respect to any 
individual for any taxable year shall not exceed $6,000. 
‘‘(c) LIFETIME LIMITATION.—The amount allowable 
as a deduction under subsection (a) with respect to any 
individual for any taxable year shall not exceed the excess 
of— 
‘‘(1) $50,000, over 
‘‘(2) the aggregate amount allowable as a de-
duction under subsection (a) with respect to such in-
dividual for all prior taxable years. 
‘‘(d) DENIAL OF DOUBLE BENEFIT.—Any amount 
excluded from the gross income of an individual under sec-
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tion 127A shall not be treated as an amount paid by such 
individual for purposes of this section. The amount of 
principal and interest with respect to which a deduction 
is allowed under this section shall not be taken into ac-
count in determining the amount of any other deduction 
or credit allowed under this chapter.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part VII of subchapter B of chapter 1 of such Code 
is amended by redesignating the item relating to section 
224 as an item relating to section 225 and by inserting 
after the item relating to section 223 the following new 
item: 
‘‘Sec. 224. Deduction for student loan payments which are matched by an em-
ployer.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Æ 
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