IRS employees owe millions in student loan repayment benefits

Over 1,000 Internal Revenue Service employees owe more than $8 million for not complying with the terms of a program that helps them repay their student loan debts, according to a new report.

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The report, released Monday by the Treasury Inspector General for Tax Administration, examined the IRS’s Student Loan Repayment Program, which it began in 2023 under the Biden administration as a way to recruit and retain qualified employees at the IRS and help young people pay off their student loan debts. Over the past year, the Trump administration has since reduced the IRS workforce by over 25%, resumed student loan debt collection efforts and closed some debt forgiveness programs.

The IRS received supplemental funding from the Inflation Reduction Act of 2022 and used some of these funds for its Student Loan Repayment Program. Approval for the IRS’s SLRP benefit is contingent on employees committing to continue working for the IRS for three years. Since 2023, the IRS had repaid student loans totaling more than $86.5 million for nearly 8,000 employees (for an average of close to $11,000 per employee).

Last July, the IRS identified over 1,000 employees who owe approximately $8.2 million because they didn’t comply with the conditions of their service agreement, according to the report. However, the IRS waited nearly two years to initiate steps to collect debt from some employees.  

If a student loan is repaid by the government, the amount repaid is considered taxable income. According to IRS management, debts were not originally established for employees because of concerns they would affect the taxable income reported on employees’ W-2, Wage and Tax Statement. However, the IRS could have issued corrected W-2’s, if necessary, the report noted.

During August and September 2025, the IRS established about $4.8 million in debt for 542 employees who didn’t meet their service agreement requirements. Approximately $3 million in debt for 399 employees hasn’t yet been formally established and approximately $400,000 has been resolved. The IRS also waived nearly $10.6 million in unestablished debt for about 1,000 employees who left under the Deferred Resignation Program.  

“If the IRS does not establish clear procedures to enforce the service agreement and debt policy, employees that committed to stay with the IRS may leave without repaying their loan benefit back to the IRS,” said the report.

It’s unclear whether the IRS will continue the program under the Trump administration, which paused it soon after the inauguration, but “it is critical that oversight continues as any funds returned to the IRS through repaid student loan benefits could be used to fund other IRS program improvements,” said the report.

TIGTA made five recommendations in the report, including that the IRS establish debt for the employees who did not comply with their service agreement; develop procedures to identify additional employees that do not comply with their service agreement; and extend service agreements for the employees we identified who had a period of non-pay status. IRS officials agreed with all five of TIGTA’s recommendations.

“The SLRP program was indefinitely paused in January 2025, and no decision on the future of the program has been made as of February 2026,” wrote IRS chief human capital officer Alex Kweskin in response to the report.