First off I know when employer's pay on student loans it is taxable income. So that's not at all what this question is about.

My employer promised $10,000 towards student loans for each year employed. I recently have reached one year of employment.

My employer's wants to send the GROSS $10k and then tax my income throughout the next year. This is not beneficial to me first because it will lower my take home pay but it actually shows as a increase in total income. The increase in total income potentially will raise my student loan income based payments.

After research on the IRS website I see that the appropriate way is to tax the amount the flat 25% with the additional 7.blahblah% and then send the net to the loan servicer. My employer however does not seem to want to do this. This benefits me because my take home pay is not lowered and it does not affect my income based payments since it can be considered a one time bonus. I realize it's less money towards my loans but I'm currently set up with PYE and don't plan to "pay off" my loans, there is forgiveness after 20 years. (and yes I know the forgiven amount is subject to taxes as well).

Please advise on if I'm correct in my research, is what my employer is trying right or acceptable?

Thanks!