If you’re working and want to continue school but aren’t sure how to fund it, your employer may offer assistance.
It’s called tuition reimbursement, and it’s how many companies help employees pay for continuing their education. Tuition reimbursement programs are growing in popularity as companies work to attract and retain employees.
Companies such as Starbucks, Amazon, Target, and more offer programs to help employees pay for a portion of their educational costs. These programs vary by company. Some companies may only cover course costs if the path of education is related to your job. Others may require employees to remain with the company for a certain period of time after completing their degree.
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What Is Tuition Reimbursement?
Tuition reimbursement, or tuition assistance, is an arrangement where an employer pays for part or all of an employee’s continuing education whether undergraduate degrees or graduate school.
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.
Recommended: How to Pay for Graduate School
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 your existing student loans.
Not every company offers tuition reimbursement, but many large ones do provide reimbursement or financial support for continuing education. Some companies may stipulate that courses must relate to your current work.
Why Companies Offer Tuition Reimbursement
It’s a perk that helps the company attract and retain employees, while also benefiting 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.
Not sure if your employer offers tuition reimbursement? Check in with your HR representative to see what options are available.
Tuition Reimbursement Requirements
The specifics of each company’s education reimbursement policy are likely laid out in an employment contract, but it’s common for a company to only offer a tuition reimbursement in accordance with certain eligibility requirements.
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.
Your employer may limit its reimbursement program to certain institutions. For example, they may provide a list of accredited institutions you can choose from. Or they require that you attend a four-year program.
Your company may reimburse you only for 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. For example, there may be minimum GPA or attendance requirements.
Sometimes a company will also require you to continue working with them for a set amount of time, since they’ve invested in your education and don’t want you to take those new skills to a competitor.
Tuition Reimbursement And the FAFSA®
An employer’s tuition reimbursement program does not preclude you from filling out the Free Application for Federal Student Aid (FAFSA). In most scenarios, an employer is unlikely to cover 100% of tuition costs, and you may still qualify for aid in the form of federal loans and grants.
That said, you will be asked to not how much you are reimbursed for, which may have an effect on how much financial aid you’re offered.
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 consider 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.
Federal Student Aid
For those who do not qualify for employer offered tuition reimbursement, there are other options that could be worth considering. As mentioned above, students can fill out FAFSA® annually. This allows them to apply for all types of federal student aid, including scholarships, grants, work-study, and federal student loans.
Private Student Loans
Beyond that, some may consider private student loans. While private student loans offer students the opportunity to finance their education, they do not always have the same borrower protections, like income-driven repayment plans, that are afforded to federal student loans. For this reason, they are most often considered only after all other options.
Recommended: Private vs Federal Student Loans
SoFi offers no-fee private student loans with flexible repayment options. (Again, private student loans don’t offer the same repayment benefits that federal student loans offer, so do your research.)
Refinancing Existing Student Loans
If you already have student loans, when it comes time to repay you could consider refinancing to a lower interest rate. This could help you reduce the amount of money paid in interest over the total life of the loan; refinancing at a lower monthly payment could help with budgeting in the short term. Note that lowering monthly payments is frequently the result of extending the loan term, which will result in increased cost over the life of the loan.
It’s important to note that there are various federal student loan repayment options and borrower protections (such as deferment or forbearance options). Refinancing federal loans eliminates them from these programs. Some private lenders offer programs similar to deferment that temporarily allow borrowers to pause payments when they experience temporary financial difficulties, including with SoFi’s Unemployment Protection.
Named a Best Student Loan Refinance Company
by U.S. News and World Report.
Employers who offer tuition reimbursement programs will cover a portion of tuition costs if the employee meets program eligibility requirements. These requirements vary by company, but may include things like maintaining a minimum GPA, coursework requirements, and stipulations around the length of employment.
If you’re looking to refinance student loans, 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.
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SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended to December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since in doing so you will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave up to $10,000 and $20,000 for Pell Grant recipients unrefinanced to receive your federal benefit. CLICK HERE for more information.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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SoFi Private Student Loans
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