Tuition Reimbursement Plans

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Tuition Reimbursement Plans

What if you find that you need a higher level of education in order to advance at your company? Perhaps a graduate degree? Scholarships and grants may not be enough to cover the cost, and you may already be burdened by existing student loans.

Better yet, what if you could continue your college career and have your boss pay for it? There is an option open to many, and it’s called tuition reimbursement. Many companies offer it, though relatively few employees take it.

Tuition reimbursement (aka tuition assistance) is a workplace benefit in which employers pay for employees to take classes while they are currently working. A primary reason for offering this benefit is to keep employees’ skills and knowledge as up to date as possible. In this way, the company can save time and money by promoting from within rather than seeking new talent from without. Tuition reimbursement programs also attract new talent as well as encourage loyalty and retention among existing employees. With a way up the company ladder offered to them, many employees feel that they are worth being invested in.

Generally, the classes taken are related to the employees’ job duties.

Rules involved

Typically, employees must follow certain rules in order to be reimbursed for their classes. The amount of coursework or credits is usually determined in advance; it’s not a blank check for all the college you want. Companies may also require maintaining a certain grade-point average throughout the course or courses.

An employer might reimburse employees only upon completion of courses. This means that employees must initially pay with their own money or take out loans, then submit a request for reimbursement. In other instances, companies will pay a tuition bill up front, but with the understanding that the employee must pay it back if grades are unsatisfactory.

The employer may limit the particular schools that qualify. It may also require that the employee work a minimum amount of months or years after completing the courses; this ensures that the employer gets a return on its investment.

How much can you receive?

There is no fixed maximum that companies must abide by, and different companies set different limits. However, there is a limit to how much can be offered tax-free: IRS rules allow employers to provide up to $5,250 per year per person tax-free. Anything beyond that amount will be included as taxable income to the employee, meaning that tax planning may be necessary. If you anticipate receiving funds in excess of this limit, it may be wise to amend your W4 form or set aside money for tax time.

Your company’s human resources department may have the information you need to get started on taking classes and getting reimbursed for them.