Employer Based Aid
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.
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. Keep in mind, the amounts and types of tuition
assistance differ, depending on the company. Some employers develop
their own educational programs while others outsource to colleges and
universities. One company may cover the full cost of tuition while
another might cap reimbursement at a dollar amount. If paying upfront is
a challenge for cash-strapped employees, the bursar's office may allow
for partial tuition payment with a letter from the employer.
Here are some key questions you’ll want to have ready to ask
- What kind of college courses are eligible? Undergraduate or
graduate? Credit-bearing or non-credit bearing? Are
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
- 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.