Everything You Need to Know About Employer-Paid Tuition Reimbursement

When you’re looking for a new job, there’s a piece of your potential compensation package that’s arguably more valuable in the long run than your starting salary: employer-paid tuition reimbursement.

After all, education can qualify you for promotions at this company and new, higher-level—and higher-paying—jobs elsewhere, earning you a lot more money over the course of your career than a few extra thousand on your salary now. So if you’re considering a new job to gain better work-life balance, a new career direction, or more compensation, you owe it to yourself to consider tuition reimbursement as a long-term investment in these goals. (Or, if you otherwise love your current role, you can advocate for this benefit wherever you are right now.)

Employer-paid tuition reimbursement benefits and policies vary depending on the company. But basically, tuition reimbursement is when an employer pays a percentage or flat amount per year of tuition—and sometimes other costs—for an employee seeking further education.

Learn more about tuition reimbursement below and, if you’d like to find this benefit in your next role, you can search for jobs at companies that offer it right here on The Muse!

For most employers, tuition reimbursement means paying for employees to take undergraduate or graduate courses. Some will pay for non-accredited courses, a.k.a., one-off courses that don’t lead to a degree or certificate. And some employers also pay for education-related expenses beyond tuition, including books.

That sounds like a significant benefit—and it is!—but it’s important to find out the details of a given company’s program to be sure it matches your needs. For example, are you restricted to particular courses or programs? How much reimbursement does the employer offer? Do you, the employee, pay the costs upfront? If so, when and how are you reimbursed? Getting these details ahead of time will save you headaches—and possibly money—in the future. Even if you’ve used employer-paid tuition at other jobs, don’t assume you know exactly how it works: Each state and employer is different.

One of the main reasons employers offer tuition reimbursement is to encourage and improve employee retention, says John McFarland, SVP of Client Development with Vensure HR, which helps small- and medium-sized businesses across the U.S. with HR issues.

“When employees are asked the reasons they stay or leave a company, it’s not always about pay,” says McFarland, whose background includes administering tuition reimbursement programs. “Pay is important to people. So are signing bonuses. But when you receive a signing bonus, you receive it and spend it and it’s gone.” Meanwhile tuition reimbursement offers employees a reward that can serve them (and the company) for the long term.

“This is a win-win scenario. The employee receives much-needed financial support to further their education, minimizing their debt/out-of-pocket expense,” McFarland says. And the employer gets value from the education and skills a worker gains from their education (along with a tax-savings benefit).

At Liberty Mutual, for example, managers frequently mention employer-paid tuition reimbursement to employees, says Alex Hall, the company’s Assistant Vice President and Director of Learning & Talent Services. And it’s not uncommon for those who take courses through the program to reinforce what they’re learning with tasks on the job that support their educational and career goals. Hall, who participates in the company’s tuition reimbursement program himself, has been invited to take on special projects that are in line with his studies as he pursues his MBA—which has both helped the company and increased Hall’s practical knowledge of the topics he’s learning about. (Full disclosure: Liberty Mutual is a current client of The Muse.)

There are many different tuition reimbursement program models, so how it works depends on the employer (who will determine what they want to offer based on tax deductibility, program expenses, or even their business model). But at many companies, your manager or an HR representative needs to approve your use of the benefit ahead of you enrolling. Employers generally pay for tuition for full-time employees on a course-by-course basis while they continue to work full time. Some employers will pay some or all of the expenses for their employees to complete specific degree or certificate programs. And some employers have a set amount they will pay per employee per year. 

Which classes you can take also depends on your employer. Some companies, such as Liberty Mutual, establish a strict framework for pursuing additional education. The employee is guided through a process that helps them determine their ultimate career goal and what education would be most beneficial. “One of the first things we do is encourage the [employee] to have a consulting call,” Hall says. “They talk about: What skills are they trying to build? What goal are you trying to reach? What schools would be the best for you?” Other employers take a less formal approach—anything from allowing employees to take any of a set of predetermined courses to just giving employees a set number of courses they can take or money they can spend per year (without restrictions on which courses or where).

You should always check with the company to understand what courses of study are eligible and how much reimbursement they’ll give employees. You also want to know what obligations you have to the employer. For example, some employers might require that you remain working for them for a minimum amount of time after they’ve paid your education costs or otherwise require you to return some or all of that money.

Employee tuition programs are as varied as companies, so you should always check with the company directly. But here are general answers to some of the most common questions you might have.

What Should I Do if I’m Interested in Taking Advantage of Tuition Reimbursement?

Speak to your manager and HR department. Some employers help their employees set goals and choose courses. Others are much more casual. But even if you work for one of these more casual companies, it may be helpful for you to get clear on what you want to learn or ask your manager what areas of possible growth they see for you.

Can I Take Any Class at Any School with Tuition Reimbursement?

Some employers will require that you take courses at specific schools, through certain programs, or in subjects directly related to your job, while others will let you take whatever class you want wherever you’d like.

Does It Matter What Grade I Get in the Course?

Many employers will only reimburse you for a class if you earn a particular grade or above. For example, Liberty Mutual employees must achieve a grade of C+ or higher for undergraduate or graduate courses. Other employers will reimburse you regardless of grade.

Can My Employer Require Me to Keep Working for Them for a Set Amount of Time After I Take Advantage of Tuition Reimbursement?

Employment law is complicated, but employers can’t require you to work for them for a set time after paying for your education. Depending on state law, however, they may be able to require that you repay the cost of the education if you resign or they terminate your employment before a certain date. 

Is Tuition Reimbursement Taxable?

If your employer pays less than $5,250 for educational benefits for you during the year, you often don’t need to pay federal income tax on it. If you receive more than $5,250, however, you must claim that amount on your taxes, according to the Internal Revenue Service (IRS). There are exceptions, though, so talk to your HR representative. When you receive your tax forms for a year where you took advantage of tuition reimbursement, your employer should include the amount of tuition reimbursement money you need to include in your wages on your W-2.

Can I Receive Other Financial Aid at the Same Time as Tuition Reimbursement? Do I Still Need to Fill Out the FAFSA?

Usually, you’re still eligible for financial aid, such as loans and grants, when using tuition reimbursement and you can and should fill out the FAFSA. You might even find that your employer encourages you to pursue these financing options to cover costs further. Still, you want to double check if the employer-paid tuition benefit affects your eligibility to receive other aid, which generally depends on the school you attend and/or the exact type of grant, loan, or scholarship you’re pursuing.

If you want to take advantage of a tuition reimbursement program—or just ensure you’ve found a company that values employee development—you’re in luck: “Tuition reimbursement is a pretty standard benefit,” Hall says. You can check the company’s website as a starting point.

Another great way to find a company that offers the tuition reimbursement program you want is to speak to friends and colleagues to hear about their experiences with different employers. But benefits change over time, so make sure you confirm that you have the most up-to-date information. You can typically ask a recruiter or HR representative during an interview process or once you get an offer.

You can also make finding a company with a tuition reimbursement program a priority in your job hunt by using The Muse to filter your search to find jobs only at companies that offer tuition reimbursement.

No matter how you identify that a company has a tuition reimbursement benefit, remember that it “means different things to different companies,” Hall says, so make sure you get all the details up front.