If you’re working and want to continue school but aren’t sure how to fund it, your employer may offer assistance.
Tuition reimbursement programs are offered by many companies. While each company has their own specific requirements, tuition reimbursement is when an employer pays for a portion of an employee’s continuing education costs.
Some employers may require employees meet certain requirements, such as working at the company for a specified time or maintaining a minimum GPA before approving their reimbursement.
Oftentimes, as the name suggests, employees will have to pay for the cost of tuition upfront and they will be reimbursed after the course is completed, so long as they continue to meet the program requirements.
What Is Tuition Reimbursement?
As mentioned, tuition reimbursement, or tuition assistance, is an arrangement where an employer pays for part or all of an employee’s continuing education.
Your employment contract may lay out the terms of the tuition reimbursement: how much of your tuition your company will cover, what courses qualify, any minimum GPA requirements, and the minimum time period of employment.
Tuition reimbursement is often offered as an employee benefit on top of a salary package, along with other benefits like health care, a 401(k), or transportation expenses.
This is different from student loan repayment assistance, when your company provides some amount of funding assistance for an employee’s existing student loans.
Not every company offers tuition reimbursement, but it is becoming an increasingly available benefit, as companies continue to compete for and retain skilled workers.
While this perk can help companies attract and retain employees, tuition reimbursement programs also benefit the company, since the courses you take may provide skills or knowledge you can put into practice back at work.
Some companies are upping their educational benefits as a way to stay competitive. SoFi at Work helps companies offer a range of benefits to their employees like student loan refinancing and student loan contributions.
How Does Tuition Reimbursement Work?
The specifics of each company’s education reimbursement policy may vary. The details are likely laid out in the employment contract or employee manual. If you have questions about whether your company offers tuition reimbursement, or the details of their program, head to HR. They’ll likely be able to help, or can connect you with someone who can answer your questions.
What Types of Classes are Covered?
It’s common for a company to offer tuition reimbursement only for courses related to your work. Sometimes they’ll reimburse classes pertaining to your current job description.
Other times, companies will approve courses focused on moving you into a management role or on gaining skills you can put towards other future roles or assignments.
For example, if you work in project management for a large corporation and are interested in learning how to use data visualization, you might be able to take community college courses in data production and visual graphics.
After understanding what courses qualify for tuition reimbursement, you could then consider looking over the other requirements. Some common requirements for tuition reimbursement programs include:
• Minimum GPA. Some may require a minimum grade point average before they issue a reimbursement. Others may offer reimbursement on a sliding scale, for example, a higher reimbursement percentage for better grades.
• Stipulations around how long you’ve worked or will work for the company. Some programs may require employees to work at a company for a certain amount of time. Others may require you to continue working there for a set amount of time after finishing school, since they’ve invested in your education and don’t want you to take those new skills to a competitor.
Paying for Classes
You’ll probably have to sign up and pay for the courses yourself first, so you’ll want to budget appropriately. In most cases you’ll need to pay for your courses out of pocket and then provide proof of completion and your grades in order to be reimbursed.
Is Tuition Reimbursement Taxable?
While you should always consult with a licensed tax professional regarding the current tax law, and in no way should any of this publicly-available information be considered tax advice, the IRS’ website currently states that employers can deduct the cost of tuition reimbursement (up to $5,250 annually). It’s a business expense for them.
The IRS website also states that the first $5,250 of tuition reimbursement isn’t considered taxable income. However, anything above that counts as part of your taxable wages and salary. Again, talking to a tax professional is always recommended.
The IRS does have some requirements on tax-free educational assistance benefits—which are not necessarily the same requirements your employer has. Typically, for the IRS to count your tuition assistance as tax-free, it should be used to pay for tuition, fees, textbooks, supplies, or equipment.
And typically, it can’t be used for meals, lodging, transportation, or any equipment you keep after the course. It’s also not applicable to sports, games, or hobbies—unless they’re a degree requirement or you can prove they’re related to your employer’s business. Again, consult with an accountant or tax attorney to get the complete picture.
What Are Other Options to Lower Education Costs?
The average cost of attending a four-year public college as an in-state student during the 2020-21 school year was $10,560 and that price tag only goes up for private schools and out-of-state students.
If you can’t get tuition reimbursement from your employer, there are other options that could be worth considering.
Federal Financial Aid
Depending on the type of course or program you are pursuing, federal financial aid may be an option. Federal financial aid, including scholarships, grants, work-study, and federal student loans, may be helpful as you cover the costs of going back to school.
To apply for federal financial aid, students are required to fill out the Free Application for Federal Student Aid (FAFSA®) annually.
Private Student Loans
If you aren’t able to qualify for federal student loans, private student loans are another option to consider. They can fill in the gaps as you pay for tuition and school-related expenses. Private student loans don’t always offer the same benefits available to federal student loans—like income-driven repayment plans or options for deferment or forbearance—so they are generally only considered as a last resort.
Recommended: A Guide to Private Student Loans
SoFi offers no-fee private student loans with four different repayment options. (Again, private student loans don’t offer the same repayment benefits that federal student loans offer, so do your research.)
Refinance Existing Student Loans
If you already have student loans, when it comes time to repay you could consider refinancing those student loans at a lower interest rate. This could lead to cost savings in interest over the life of the loan. Refinancing to a lower monthly payment could help with budgeting in the short term, but may lead to more interest over the life of the loan.
If you choose to refinance your student loans, federal loan benefits will no longer be available to you, such as Public Service Loan Forgiveness (PSLF), income-driven repayment options, or deferment or forbearance options.
As defined above, when an employer offers to reimburse employees for a portion or all of their continuing education costs, this benefit is called a tuition reimbursement program. Again, even if your employer offers tuition reimbursement, you may still have to pay for the courses upfront. And if the cost of classes is higher than the amount offered, you may still need to pay the additional amount.
If you’re looking to refinance or borrow a private student loan, prequalifying online with SoFi takes just two minutes. SoFi offers student loan refinancing with no application or origination fees and no prepayment penalties. Plus, existing SoFi members may qualify for rate discounts.
Learn more about student loan options available with SoFi.
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