Tuition Reimbursement is an incredible benefit offered at many workplaces that goes unused. Too many Americans leave money on the table and fail to maximize this valuable benefit to help cover the cost of higher education. Keep reading to learn how you or a loved one might be able to use this benefit to pay for college.
What is Tuition Reimbursement?
Tuition reimbursement is an employer provided benefit to help with educational expenses related to college. This valuable benefit is underused and overlooked by many Americans every year. A survey of American companies found that 90% of mid to large size companies offer tuition reimbursement program. The same survey found that only about 10% of eligible employees use the benefit!
"An intelligent heart acquires knowledge, and the ear of the wise seeks knowledge." Proverbs 18:15 ESV
Why do Companies Offer Tuition Reimbursement?
Tuition reimbursement, just like any other benefit at work, is meant to attract and retain good people. Another way to look at it is if an employee wants to further their education, many businesses see this as a win-win and worth the investment. Furthermore, companies get to take a tax deduction for what they pay toward tuition reimbursement.
Who Qualifies for Tuition Reimbursement?
The company can set requirements before employees can participate in a tuition reimbursement program. The most common requirement is amount of time you work for an organization before you qualify for tuition reimbursement. For example, some companies require you to be employed for a year before you participate. Some, however, make you eligible on day one of employment. Some programs also requite you to be in good standing on the job or achieve a minimum level on a company's performance rating scale.
Example of how a policy can work with employment types
Do You Have to Pay Back Tuition Reimbursement?
It’s possible in some circumstances, but you have to read your company’s rules. Some organizations want to protect against the possibility of an employee furthering their education on the company dime and then leaving for another job. To that end, there may be conditions associated with accepting tuition reimbursement dollars. The most common condition is a length of time after reimbursement that you must remain at the company to avoid repayment. The agreement is typically written so that if you quit in a set period of time you have to repay the company. A distinction is often made between you voluntarily leaving vs. a layoff. Layoffs are typically exempt from payback provisions. In any event, carefully read the terms so you know if you’re on the hook for any potential payback.
Example of a Repayment Policy
Does Tuition Reimbursement Lower Your Paycheck?
No, tuition reimbursement is in addition to your salary and any other compensation.
Will I Owe Taxes on Tuition Reimbursement?
As long as rules from the IRS are followed, you will owe no taxes on tuition reimbursement. Your employer can provide up to $5,250 (The limit as of 2021) in what the IRS calls “employer-provided educational assistance” each calendar year with no taxes owed. Employers have to meet some other criteria to meet IRS rules like maintaining a written plan, avoiding discrimination, and not favoring owners of the company. Those requirements are up to them as an employer and not you as the employee. If your employer were to pay above the IRS limit, the dollars above the limit would be taxable like any other compensation. This scenario would be rare and your HR department would almost certainly alert you to this possibility.
As long as rules from the IRS are followed, you will owe no taxes on tuition reimbursement.
Can a Parent Use Tuition Reimbursement Toward a Child’s College Costs?
No, unfortunately this is only a benefit for the person employed. A parent’s employer could offer a scholarship or other educational help for a child. Keep reading for how a full-time student might be able to use tuition reimbursement for themselves.
Can I Use Tuition Reimbursement for My Spouse Going Back to School?
No, unfortunately this is only a benefit for the person employed.
How Does Tuition Reimbursement Work?
Programs are specific to your workplace for their specific administrative steps. Typically, you would take a class paying the tuition up front yourself. After successful completion of the class, you would submit grades to HR, and receive reimbursement at a later time. It is common for reimbursement to be based on the grade you obtain as part of your company’s policy. Expect to get more money for an A than a C. Also, remember that tuition reimbursement levels are almost always based on a calendar year as opposed to the school year. Bear this in mind as you plan out your course schedule.
How to Use Tuition Reimbursement as a Full-Time Student with a part-time job
Tuition reimbursement is overlooked by many as an option for traditional students. All the same benefits (like no taxes) apply for a student with a part-time job who takes advantage of tuition reimbursement. If your son or daughter is considering a part-time job during school, this benefit should absolutely be on the table.
What Kinds of Part-Time jobs offer Tuition Reimbursement?
There are many kinds of student-friendly jobs that offer tuition reimbursement. Food service, retail, and many more offer this benefit to part-time employees.
How Much Money can you Get for Tuition Reimbursement with a Part-Time Job?
The IRS maximum ($5,250 as of 2021) is the same as for a full-time job. That’s a maximum so an employer that offers a program could have an amount of their choosing within that limit. Reimbursement amounts could also be different for full-time versus part-time employees. Some employers choose to make no distinction between that status in their reimbursement program. Remember, an employer can also reimburse a different amount based on grades.
Who Qualifies for Tuition Reimbursement with a Part-Time Job?
This is a completely up to the company. When a company includes part-time staff, they can put in requirements to participate in the program just like they do with full-time employees. The most common requirement is to work in the job for a set period of time before reimbursement is a possibility. With that in mind, some companies choose to offer eligibility right away.
Does Tuition Reimbursement Affect Financial Aid [Scholarships]?
It is possible for tuition reimbursement to affect the level of need-based financial aid a student receives. Income a student earns and dollars they receive via programs like tuition reimbursements can affect the formulas used to determine need-based scholarships. If you’re concerned about this possibility, you can seek counsel with the financial aid office at your specific university. They may be able to offer guidance on the specifics for any financial aid awards a student may be already using. Overall, remember that financial aid formulas depend on a number of factors. Tuition reimbursement, like anything else, is just one of these factors.
How do you Know if a Company Offers Tuition Reimbursement?
Large and midsize companies often list the benefit on their website. You can always ask when applying for a job. Be sure to make a distinction between tuition reimbursement and other educational programs. For examples, some companies will offer tuition discounts if you enroll at a particular college or some online universities. While these can be great benefits, they’re also separate programs. Tuition reimbursement at the school of your choosing is an important distinction you’ll want to check out.
Example of how a company can list tuition reimbursement on their website
What if my Current Employer Doesn’t Offer Tuition Reimbursement?
You can ask! Just like any other benefit, you can professionally tell someone from HR or leadership how valuable a benefit like this would be to you.
Should You Use Tuition Reimbursement?
There’s always a number of components to any job for pros and cons. While you probably shouldn’t take a job just because they offer tuition reimbursement, it can be a great benefit to have. Aside from a potential payback depending on your employer and circumstances, there’s not much reason to avoid taking advantage of a program like this. Read the find print and know the rules before you participate. Beyond that, welcome the assistance to help pay for higher education. Study hard.
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