How to Navigate Employer Tuition Assistance Programs

For many adults looking to go back to school, the cost of higher education can be a major roadblock. One option to help cover this cost is employee education benefits. Employer tuition assistance programs are standout benefits that many companies provide. These programs showcase employers’ investment in the personal and professional growth of their workforce, and act as a critical tool in attracting and retaining top talent.

Almost 50% of companies in 2022 provided some form of educational benefits. These benefits include various forms of financial support such as tuition reimbursement, direct payment of tuition fees, and educational grants or scholarships. Additionally, some companies offer student loan repayment assistance and establish partnerships with educational institutions to provide discounted tuition rates for employees and their families. Understanding how these programs work can open the door to helping you pay for college.

Employer Tuition Assistance vs. Tuition Reimbursement

As you consider your employee education benefit options, there are two common types: employer tuition assistance and employer tuition reimbursement. Tuition assistance involves your employer providing you with funds up front to cover your educational expenses. As long as the tuition, fees, and materials are under your assistance limit you will not incur any out-of-pocket expenses.

Tuition reimbursement requires you to cover the cost of your education and then request reimbursement from your employer. Depending on your employer’s policy, reimbursement is often provided upon completion of the session, semester, or program. This form of aid often has a yearly limit to protect the employee from paying income taxes on that benefit.

Common Employer Tuition Benefit Criteria

While employer tuition assistance is commonly offered, these programs often include stipulations and conditions. For example, they may require you to maintain a minimum GPA, designate select universities that you can attend, or provide tuition assistance only for specific programs that will advance your work and responsibilities.

Some employers only offer tuition assistance to employees who have been with the company for a set period of time, or those who will guarantee that they will work for the company for a period after finishing their degree. Before enrolling in your company’s tuition assistance program, it’s important you read the terms and get clarification on anything unclear. While adding these stipulations helps your employer secure the advantages of their investment, you want to be sure the terms are beneficial for all parties.

Do Employees Have to Pay Taxes on Employer-Provided Tuition Assistance?

When it comes to paying taxes on tuition assistance, the rules can vary depending on the type of program and the amount of assistance provided. The employer-provided tuition assistance can exceed $5,250. The excess amount is considered taxable income for the employee; however, there are certain exceptions for those employers who are willing to consider the assistance a working condition fringe benefit. Be sure to keep accurate records of your tuition assistance payments and related expenses to help simplify the process during tax season.

Why Employers Offer Tuition Assistance

There are multiple reasons why an employer may choose to offer tuition benefits. First, a well-educated workforce is necessary to achieve company goals. If the criteria for tuition assistance is designed to only cover programs that support the organization’s mission, then paying for employee tuition is considered an investment.

For example, if a business has an employee they think would do well in a leadership role but that employee lacks managerial training, they can offer tuition help to pay for an MBA. When the student graduates, they will be better equipped to lead, and the organization benefits from retaining a skilled worker and gaining an educated leader from within.

Furthermore, helping employees advance their education can build loyalty from an organization’s workers. The more qualifications employees have to feel confident in their role can increase job satisfaction. A study conducted in May 2022, found that 86% of workers at companies offering tuition assistance were happy in their role. The ability to retain top talent is a major cost savings compared to recruiting a new hire.

Lastly, employers are able to deduct the same amount of tuition offered, up to $5,250, from their taxes under the IRS Section 127. This deduction is not subject to social security, Medicare, or federal unemployment taxes, so while the money is “free” to you, employers are able to use it as a tax write-off.

How to Discuss Tuition Benefits with Your Employer

If you are working for a large company, it's likely your employer already has some education benefits available. You will need to speak with your HR department to learn more about the program and requirements.

If you are working for a small to midsize company, they may provide tuition assistance on a case-by-case basis. You will also need to set up a conversation with your HR department, which may need to loop in other members of your company’s leadership team. It's important to approach the conversation with a clear understanding of your goals and how the program aligns with your professional development and your company’s vision. Be prepared to provide information on the specific university and degree program you wish to pursue, and how it will benefit you and the company.

It may also be helpful to gather data on the potential return on investment, such as the skills or knowledge that can be applied to your role. Focus on how higher education will improve your efficiency, innovation, and problem-solving skills. By presenting a well-thought-out proposal, you can demonstrate your commitment to growth and make a compelling case for tuition assistance.

Employers often go beyond just providing tuition benefits directly. Many partner with universities to offer discounted tuition rates for their employees, their children, and their spouses. For example, UMass Global collaborates with nearly 500 companies across various sectors, providing such discounts. This partnership not only benefits the employees but also fosters ongoing education and skill development within the workforce.

Take the Next Step In Your Career with UMass Global

Employer tuition assistance programs provide working adults the opportunity to further their education without the added financial stress of going back to school. For those seeking to leverage their education for career advancement while contributing value back to their employer, UMass Global offers online bachelor's and master's degree programs designed with flexibility and real-world application in mind. With our numerous degree programs and courses, you'll likely find a program that fits both your needs and your employer's needs. Request more information or apply today.