Both good responses. Let me add one more. Loans are very different then conditional wages. There is very hard law on loans. There is not very hard law conditional wages. Past that employee paid educational expense is not automatically non-taxable no matter what the employer wants. So we have one question as to the inherent taxability of the educational expense, and we have unrelated to that the mechanism the employer is using to handle who ends up paying. If the employer knows what they are doing (not a given), they would have had you sign a contract agreeing to conditionally forgive the loan over time, assuming conditions are meet. If they have an unpaid balance, that balance structured as a loan, they have very clear law supporting their action. On the other hand if all they have is a company policy, not specifically structured as loan, but rather defaulting to a conditional wage payment they are in at best a grey area. No signed contract makes the grey very dark indeed. I am not saying the case #2 is a winner for you, but I will say that the employer took something simple and turned into something complicated. Smart employers keep it simple.

