Four Steps to Using Your Employer's Tuition Assistance Program

Four Steps to Using Your Employer’s Tuition Assistance Program

By Beth Dumbauld

Going to college and working full-time may be one of the best financial decisions you can make. Earning your college degree, whether undergraduate or graduate, increases your value to your employer, and as a result, can help increase your job stability and career trajectory at that company. By continuing to work while you obtain your degree, you can maintain your income and, at the same time, add onto your educational portfolio. And if your employer offers a Tuition Assistance Program, you can come out ahead.

What Is a Tuition Assistance Program?

Simply put, a Tuition Assistance Program is a program, generally run through an employer’s human resources department, whereby employees can take college courses (undergraduate or graduate) paid for by that employer.

From a tax perspective, you can exclude up to $5,250 of educational assistance benefits each year. This means your employer will not include those benefits with your wages, tips, and other compensation shown on your Form W-2. This also means that you do not have to include these benefits on your income tax return.1

The First Step Towards Using a Tuition Assistance Program: Research

Before can you take advantage of employer-sponsored tuition assistance, you must be able to identify whether there is a qualified program where you work, or not. Typically, education assistance benefits are administered through an employer’s human resource department. Asking your HR representative would be the best place to inquire about the written policy regarding tuition assistance. Ask for a copy. If they do offer a tuition assistance program, the information will be written down, as it is a governmental requirement for any employer who chooses to administer a qualified tuition reimbursement program. The clearer the policy, the better for you to take advantage of it appropriately.

Here are some key questions you’ll want to have ready to ask HR:

  • What kind of college courses are eligible? Undergraduate or graduate? Credit-bearing or non-credit bearing? Are online college classes acceptable?
  • How are college courses reimbursed? Does the employer pay for the course up front? Or will you need to pay the tuition first and submit an expense upon course completion? To whom will you submit the expense for reimbursement? On a semester basis? On a per-course basis?
  • Is there a GPA requirement? Some employers may reimburse all passing grades fully. Others may have a graduated repayment plan, with course completions of an “A” receiving full reimbursement, and course completions of a “B” receiving a partial, and a “C” receiving less still, and etc.
  • What happens if you fail a class or must drop out? You need to fully understand the consequences of paying for a course or semester out-of-pocket in advance, only to withdraw later. You may be obligated to eat the full cost of that course by no longer being eligible for reimbursement, per your employer’s course completion requirements or policy.
  • What happens if you leave your current employer? Are there different consequences should you leave the company by choice, by a firing, a layoff, or a transfer? Often companies place a time-related component on tuition reimbursement, requiring that an employee remain at the company a certain length of time or be required to pay back the educational benefit if they leave before that time has passed.
  • Is there a completion schedule? You need to understand, for example, if you start an undergraduate degree program, does the employer expect you to graduate in a certain number of years or hit certain course milestones by specific dates.

1 IRS, Employer-Provided Educational Assistance
http://www.irs.gov/publications/p970/ch11.html