Helping employees keep their skills current has benefits for employers and employees alike. Organizations that offer tuition reimbursement programs find it easier to hire and retain top talent, and up-skilling can be more cost-effective than hiring new staff. For employees, taking advantage of your employer-sponsored tuition programs is the perfect way to finance your education, build new skills, and add value for your company.

Therefore, the majority of companies today offer tuition reimbursement or coverage to help their employees pursue their educational goals. According to one recent study, as many as 92 percent of companies have some type of educational benefit program.

Learn more about employer tuition reimbursement, how to take advantage of your employer’s program, and steps you can take if your employer does not currently have a tuition reimbursement program. 

What is Employer Tuition Reimbursement?

A tuition reimbursement program enables a company to cover some or all of the costs of an employee’s education, as long as the program of study and related expenses fall within the guidelines of that company’s specific policy.

Tuition reimbursement can be used to fund (or partially fund) an undergraduate or graduate degree program. These benefits may also cover job-related professional development courses or specific skill-building classes, or even educational courses that may not be specifically job-related.

To find out if your company offers education reimbursement, you can talk to your manager or supervisor, ask your HR representative, or check out your employee guides.

Tax Implications of Tuition Reimbursement

Taking advantage of an education assistance program can impact your taxes

Federal tax law allows employees to get up to $5,250 in tuition reimbursement tax free from their employer every year. This means that up to that $5,250 cap, you don’t have to declare the tuition reimbursement on your federal income taxes, as long as your company has a written policy and the policy meets all federal tax guidelines.

Under that same federal tax law, tax-free employer-funded education assistance can cover tuition, fees, books, and some supplies and equipment. It cannot cover meals, lodging, and transportation, tools and supplies you keep, or courses involving sports or hobbies (unless work related or a required part of a degree program).

There’s a tax benefit for your employer as well: Your company can take that same amount—up to $5,250 per year, per employee—as a tax deduction.    

In most cases, any tuition assistance you receive from your employer over $5,250 will be included as income in your yearly tax filing. However, if the tuition reimbursement is specifically job related and you can claim the cost as a deductible business expense, reimbursement above $5,250 may be considered a Working Condition Fringe Benefit and therefore not taxable. 

Impact on Financial Aid

If your employer’s tuition assistance isn’t enough to cover the entire cost of your program, you might be able to obtain financial aid to pay the difference. Receiving tuition reimbursement benefits should not prevent you from being approved for loans or other aid. 

However, it may limit or reduce how much financial aid for which you are eligible. When you complete your financial aid applications, you will need to include any employer reimbursement as part of your comprehensive financial statement.  

For most people, that’s probably not a reason to avoid taking advantage of your employer’s educational assistance, especially if the alternative is to take out loans. 

Getting Started: Using an Employer-Sponsored Tuition Reimbursement Program

The specifics of each corporation’s tuition reimbursement policy can vary widely, so it’s important to familiarize yourself with the details of your company’s policy before enrolling in a class or program. 

Here are some critical questions to ask regarding your employer’s program: 

Does the course/degree/program need to be job-related?

Some companies may include tuition reimbursement for any coursework, especially if part of a degree program. Others, however, may limit educational assistance to classes or programs that are directly related to your job.

What programs are eligible? 

There may be limits on where you can attend programs, whether geographical or by institution. You may be restricted to certain locations or accredited institutions, so check the fine print. 

Additionally, see if your employer has any cooperative agreements with nearby schools or adult education centers that you might utilize. 

Who needs to approve my request for reimbursement?

You will likely need to get written approval from your manager before you can submit for reimbursement. You may also need to get sign-off from HR.

PDF icon.

Need approval from your boss?

Many organizations have a budget for employee career development. Use the template request letter we’ve created to tap into those funds.

Do I need to maintain certain grades?

Some employers will require you to get a certain grade before they will reimburse you, or they may have a sliding scale. For instance, they might give 100 percent reimbursement for an “A,” 90 percent reimbursement for a “B,” and so on. 

How does reimbursement happen? 

Usually, reimbursement is given on a course-by-course basis, and can be handled in one of two ways:

  1. Your employer may pay the school for the program directly on your behalf,
  2. Or your employer may require you to pay out of pocket and reimburse you after you complete the coursework.

How long do I have to be employed before I can utilize the reimbursement program?

The answer to this question will vary widely from company to company. Some employers may allow you to start taking classes immediately. Others may require that you be employed by the company for a certain amount of time before claiming benefits. 

It’s also important to know whether you must be a full-time employee to take advantage of tuition reimbursement.

Do I have to commit to staying at the company after I am reimbursed for a course?

Most companies have some requirement that you remain with the company after reimbursement. The requirement can range from weeks to months to even years. 

You should also be sure to check the policy carefully to see if there are any circumstances in which you would need to pay the company back. For instance, if you leave voluntarily or are terminated for cause within the commitment window, you may need to return a certain amount.

Will coursework impact my ability to fulfill my job requirements?

Be sure that you know exactly what the course will require in terms of workload. Also, make sure that your manager understands how pursuing a professional development course or degree program may impact your ability to fulfill your job requirements. 

Will you be able to complete all the necessary coursework outside of working hours or will you need to decrease your weekly hours to have time to do the work? Will you need to take time off to attend lectures or classes or are the program requirements flexible? 

Be clear with your employer in advance so there are no surprises or misunderstandings once the course begins.

What are the necessary deadlines?

Communicate clearly with your HR department about what paperwork you need to complete (and get signed, if necessary) and when it must be done. 

Your employer probably has some type of tuition reimbursement approval form that you need to fill out and have signed by your manager several weeks, or maybe even months, before the program starts.

After you finish the program, you may need to provide some form of documentation from the school or program showing that you completed the course and the grade you earned. You may need to do this even if your employer paid for the program on your behalf.

What if My Employer Doesn’t Have a Tuition Reimbursement Program? 

Just because your employer doesn’t have an existing tuition reimbursement policy doesn’t mean you can’t explore it as a potential option. It could be that no one has ever asked for one. 

The key to making a strong case for tuition reimbursement lies in being specific. Avoid general statements and lay out a business case for how your training will benefit the organization. 

Come into the discussion prepared to give your manager details such as exactly what class you want to take, where and when the class is offered, and how much it will cost (or how much reimbursement you want).

Be ready to show your employer that helping you pursue your educational goals can have substantial benefits for the organization. 

Remind them that having a tuition reimbursement program can help a company:

  • Retain and promote top talent
  • Improve employee satisfaction and loyalty
  • Earn a reputation as a good place to work 
  • Build stronger teams across all operations
  • Boost innovation and productivity

And most importantly, be specific with your manager about how the course or program will strengthen skills that provide real value. 

As you prepare for this discussion, here are a few other points you may want to consider:

  1. Be realistic about whether your employer can afford educational assistance. Some businesses—especially small organizations that may be operating with only minimal profits—may struggle to find the necessary cash for a tuition reimbursement program.
  2. Be prepared to start small. Instead of jumping right into an entire degree program, for example, start with just one professional development program or work-related course. This will give your employer a chance to see the benefits in real time, without making a major financial commitment.
  3. Include with your proposal a draft policy for your employer’s review. To be eligible for tax deduction, your employer’s policy must be written. By drafting a potential policy on behalf of your employer, you are both easing their workload and demonstrating the seriousness of your proposal.

Going back to school while working requires resourcefulness. And being resourceful means using every benefit available to you. If your company is willing and able, let them help you take that next step.