The Ultimate Guide to Corporate Tuition Reimbursement
When it comes to paying for college, every dollar counts. Students seeking free money to finance their education usually think about scholarships and grants. However, it pays (literally!) to check into another potential source of funds — your current employer. Corporate tuition reimbursement can be a great way to further your studies on someone else’s dime.
What is Corporate Tuition Reimbursement?
Corporate tuition reimbursement is when a company contributes money to further an employee’s education, either through direct payment to the school or through paying back the employee for costs incurred. The organization may offer a set amount, such as so much toward each class, or pay a percentage of the total cost.
Corporate tuition reimbursement is an attractive employee benefit that aids in retention and recruitment for the company itself. It shows current and prospective employees that the employer values education and professional development. Not only does working for the company become more desirable because of tuition reimbursement, but the organization also gains from building a more educated workforce.
Doesn’t a danger exist that workers will go to school on their employer’s money and then head elsewhere with their new degree in hand? As organizations offering corporate tuition reimbursement want to reap the reward, many stipulate a period of time during which someone who received money must stay with the company or potentially face paying the money back.
What Does Corporate Reimbursement Pay For?
Companies vary in the things for which they will pay. Some may contribute only toward earning an undergraduate or graduate degree. Others may cover individual classes that directly pertain to your job. Broad plans may allow any type of educational enrichment, such as learning a second language.
But don’t forget about taxes! Federal tax law plays a role in what employers can cover. Workers can receive up to $5,250 in tuition reimbursement tax-free from their employer every year (and the company can take that same amount as a tax deduction). This money can go toward tuition, fees, books, and some supplies and equipment. However, tax law prevents the funds from covering meals, lodging, transportation, or courses involving sports or hobbies (unless work-related or required as part of a degree program). Note that some employers may reimburse more than $5,250, but the recipient will need to report this excess on their annual tax return and pay the appropriate taxes.
Students whose employer helps pay for higher education expenses still can apply for financial aid if necessary. This money can be used toward things corporate reimbursement won’t cover. It also can make up the difference if the cost of attendance is greater than what your employer provides. Because the Free Application for Federal Student Aid (FAFSA) and similar financial documents should present a comprehensive, honest portrait of resources, be certain to include information on employer-sponsored educational benefits.
How Does Company Tuition Reimbursement Work?
Each company has its own way of handling education benefits. In general, though, employees go through a process of asking for and receiving funds. The company does not simply hand workers a lump of money to use it as they see fit.
Three Steps To Get Started With Corporate Tuition Reimbursement:
- Consult your employee handbook or benefit’s guide. This information will give you a good idea of what types of educational benefits are available and how one goes about receiving them. It also can fill you in on potential stipulations, such as how long you need to work for the company before you can receive corporate tuition reimbursement.
- Talk to human resources. A rep there should be able to walk you through the process. Needed actions might include managerial approval, proof of acceptance or enrollment, or paperwork detailing what degree program or coursework you intend to pursue.
- Be certain you understand how payments get handled. Some employers may require you to pay tuition upfront and then put in for reimbursement once you complete classes. Others may directly pay the school when you submit a bill.
10 Companies That Offer Corporate Reimbursement
Surveys show that roughly 80% of mid-sized and large employers offer some sort of tuition reimbursement. Here’s a look at a few such programs:
Is my tuition reimbursement money taxable?
- According to the IRS, “If your employer pays more than $5,250 for educational benefits for you during the year, you must generally pay tax on the amount over $5,250. Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income.”
Do I have to pay back employer tuition reimbursement?
- Corporate tuition reimbursement is money your employer gives toward your education. It is not a loan that needs repayment. However, many companies have policies stating how long someone who accepts that money must remain with the company. If you choose to quit or are terminated for cause during the period of time you’ve agreed to remain following your educational benefit, you may be required to pay back a certain amount. It’s important to understand the full, specific terms of liability when you apply for corporate tuition reimbursement.
Why do companies offer tuition reimbursement?
- Companies offer tuition reimbursement as an employee benefit. It makes the organization more attractive to potential workers, attracting top talent and encouraging current employees to stay. It also helps the business develop a more educated staff who can bring that knowledge back to help the company grow and improve.
What companies offer 100% tuition reimbursement?
- Target, Wal-Mart, Amazon, and many other employers cover the full cost of tuition for eligible employees. Note that fully tuition-free programs often come with stipulations, such as where the degree is pursued, what programs of study are allowed, and how many hours per week you must work in order to be eligible.