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What is tuition assistance? (And does your employer offer it?)

By Laurie Davis

At a glance

  • Tuition assistance is when an employer contributes toward an employee’s higher education.
  • Tuition assistance programs benefit employers by closing skills gaps and improving employee retention.
  • Check with your human resources department to learn more about approved tuition assistance options and eligibility requirements.
  • University of Phoenix is an accredited institution that works with more than 1,500 employers to offer accessible education to employees. Find out if yours is one of them!

In today’s financial world gone mad, any assistance with tuition is a thing of beauty. But when it comes down to actual “tuition assistance” (and what it means when those two words are used together), did you know that your employer may help do some of the heavy lifting with tuition?

Whether your employer is a bank, a bookstore or a coffee shop, it may offer a tuition assistance (or tuition reimbursement) program through which it can contribute to the cost of higher education for employees.

Of course, free is never really free — most tuition assistance programs come with fine print. But many employers find tuition assistance programs an attractive option for closing the skills gap in their workforce and improving employee retention. For eligible employees, meanwhile, it can be a cost-effective way to earn a degree.

 

How does tuition assistance work?

In September 2021, Amazon announced it was going to cover the cost of college tuition, books and fees for its 750,000 U.S. employees. Soon, a few retail giants followed suit.

For years Starbucks had been offering a similar benefit, and by fall 2021, 7,000 of the coffee giant’s employees had earned degrees. These days, many large and mid-size employers help cover at least some of the cost of tuition for eligible employees.

But how does it all work, and how can you get started?

With most employers, a good starting point is the human resources (HR) department. An application for tuition assistance and a determination of your eligibility (and program selection) by your manager or supervisor are needed to get the ball rolling. If you’re eligible and approved for tuition assistance, it’s time to find the school that aligns with your schedule and your employer’s parameters and enroll.

In most tuition assistance programs, a student will pay the cost of tuition and fees up front, and then, once a semester or course is complete, their employer will reimburse them according to the terms of the company’s program.

 

So, what’s the catch?

As with any employer program, the employer gets to set the rules. It’s important to read the fine print before you jump in.

For example, some employers will pay only up to a certain dollar amount each year. Others make reimbursement contingent on grades, with some employers even using a sliding reimbursement scale based on letter grade performance (e.g., full reimbursement for A’s, 80% for B’s, 60% for C’s, zero for D or F grades).

In some companies, tuition assistance rates vary by position and employment status.

Obviously, employers want to safeguard against paying an employee’s higher education costs only to watch that employee resign before the ink on their diploma is dry. Thus, you may be required to remain at the company for a set period or reimburse the company for part of the tuition assistance if you leave before the period’s up.

It’s also important to talk to a tax advisor about possible tax implications you may face as a recipient of tuition reimbursement. Tuition reimbursement is taxable in certain situations, according to the Society for Human Resource Management (SHRM).

Students counting on a combination of partial tuition assistance and federal financial aid will also want to talk with an enrollment representative or finance advisor about possible federal financial aid implications. (Tuition assistance may be considered part of a student’s financial aid package, thus potentially lowering the federal financial aid award you may qualify for.)

Most employers have tuition assistance agreements for students at certain colleges or universities, so it’s important to research those options too. This is especially true if you’re job hunting and your search has come down to two potential employers. This can be a delicate question to ask during an interview — especially if you’re worried about a lack of a degree holding you back from getting the job. However, you could call the HR department to see if it has a list of the company’s approved tuition assistance affiliates. Or wait for an offer sheet and explore details then.

One other note: According to Best Colleges, some companies may reimburse you only for classes taken at an accredited school.

 

Other considerations

There isn’t always “a catch.” In some cases, your employer might even incentivize you to stay with the company rather than punish you for leaving. For example, some companies reward employees who earn degrees with company stock, giving them added incentive to stay. Others even let employees complete coursework as part of their official office responsibilities, fostering a loyalty that companies hope will pay off in the long run.

Fun fact

Based on responses from more than 2,500 HR professionals surveyed in SHRM’s 2020 Employee Benefits Report, more employers offered undergraduate or graduate tuition assistance in 2019 than in previous years.

Also, higher education options aren’t as black and white as they used to be. If you’re concerned about being able to balance work, family and school, remember that tuition assistance programs exist for college certificate completion too. Sometimes upskilling in a focused area can improve your job performance there and demonstrate your commitment — all while giving you a taste of what it’s like to be back in class.

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If you love it, maybe going on to earn a degree is the right step for you. If a certificate does the job, your employer’s tuition assistance program may help you achieve that on your employer’s dime.

Finally, if you work for a smaller or mid-size employer that doesn’t currently offer tuition assistance, it doesn’t hurt to ask them to add this benefit. It’s still an employees’ market out there. While the U.S. Chamber of Commerce reports signs indicating that hiring rates are finally outpacing quit rates, the so-called Great Reshuffling of workers still has employers looking at how to attract and retain employees. You might be able to make a case for how tuition assistance can benefit you — and them — in the long run.