Article

The basics of employee tuition reimbursement

February 29th, 2024 - 5 min read

Investing in employee education gives people the chance to advance their skills and career opportunities, often in significant ways. But the challenges are equally significant for those who lack the time and money. The fact is that affordable and high-quality education is often inaccessible for so many people.

Employers have tried to make education more accessible through programs like tuition reimbursement. However, this has its own set of benefits and drawbacks in the context of the modern workforce.

Let’s explore how employee tuition reimbursement works and what it can (and can’t) do for your business.

What is employee tuition reimbursement?

Tuition reimbursement is an employer-provided benefit that reimburses employees for their education expenses with a predetermined amount. Tuition reimbursement programs can take various forms, and most companies have specific rules, policies or conditions that the employee needs to meet to receive the funds.

Tuition assistance vs tuition reimbursement

Tuition assistance is a broad term that accounts for a variety of education assistance programs, such as loan debt assistance or employer-sponsored scholarships. Tuition reimbursement is a type of tuition assistance program, but they are not the same.

How does employee tuition reimbursement work?

Employers often present tuition reimbursement programs as a perk to attract talent during the recruitment process, in the same way they’d advertise their 401k, vacation days or healthcare benefits.

However, employees need to jump through several hoops to take advantage of a tuition reimbursement benefit. Some example program requirements include:

The company reimburses the employee only up to a certain amount of money per calendar year, and the amount is sometimes based on grades earned. For example, if the employee receives an A average, the company will pay 100% of the maximum reimbursement amount. If they receive a B, the company will pay 80% and so on.
Tuition reimbursement benefits might apply only to specific courses or programs, which may need to be completed within a specific timeframe.
The employee receiving tuition assistance may be required to stay with the company for an allotted period of time before changing positions or leaving the organization altogether.
Offerings may differ depending on employee status. Some companies only offer tuition assistance to full-time employees.
Offerings may be limited or tied to specific work. At some places, employees are required to enroll in courses or programs that are related to their work.

Does tuition reimbursement get taxed?

Employers can provide up to $5,250 per year for tax-exempt tuition reimbursement. This amount applies to both undergraduate- and graduate-level college courses. Anything over $5,250 is generally considered taxable income.

Can you make employees pay back tuition reimbursement?

It’s possible to set certain conditions as part of your tuition reimbursement program. Employees would need to meet these conditions or face the risk of paying back some or all of the funds that were used to pay their tuition.

However, stipulations like these can greatly reduce employee participation in tuition reimbursement programs. The mere possibility of needing to repay costly education expenses is enough to turn anyone away.

The benefits of employee tuition reimbursement

An educated workforce benefits employees and employers alike. Here are a few reasons why employers should offer tuition reimbursement for access to education:

Continuing education boosts employee performance
A recent report found that 93% of CEOs who introduce upskilling programs see increased productivity, improved talent acquisition and retention, and a more resilient workforce.
Workforce education can improve retention and foster internal career mobility
In one study, 76% of employees said that they were more likely to stay with their employer because of their tuition reimbursement benefit. Allowing employees to pursue debt-free education shows value in their long-term growth, which in turn encourages them to stay and grow with their employer.
Attract growth-minded talent
Education benefits signal to prospective job candidates that your organization values its employees and is committed to their long-term professional development. This can be a powerful tool for attracting qualified job-seekers who are eager to learn and grow with your organization.

The challenges of employee tuition reimbursement

While tuition reimbursement programs are intended to be an attractive benefit, they often have low awareness and participation rates among employees.

A recent InStride survey of Fortune 500 employees found that 80% of workers indicated they would like to go back to school, but only 40% were aware their employer offered a tuition reimbursement program. Further, the survey showed that only 1-2% of workers who had access to such a program actually participated.

Some of the factors that may discourage participation include:

Policy restrictions
The employee tuition reimbursement policy might have stipulations that are too difficult for employees to meet, discouraging them from taking advantage of the program.
Financial barriers
A tuition reimbursement program might not actually make education more affordable for the employees – this is especially true if there’s a cap on the amount that the employee can be reimbursed. Educational expenses go far beyond tuition and often exclude costs like textbooks, obligatory school fees and loan interest, posing significant financial barriers for many employee learners.
Only applicable to the current position
Employees pursue continuing education to make meaningful advancements or shifts in their careers. But some reimbursement policies will only fund education that is specific to the employee’s current position instead of the one they’re looking to grow into. This offers little incentive for the employee to commit to upskilling to advance or reskilling into an entirely different role within the company.
Lack of support for employees
Providing access to reimbursable education is a great benefit, but many tuition reimbursement programs lack support to help employees make decisions. Without built-in support, employees might be overwhelmed by the range of options, or even lack guidance about applying academic credit they might already have to a new program.

Additionally, traditional tuition reimbursement programs are often difficult to measure. Many don’t have built-in technology to adequately measure the performance and impact of these programs on employees and the business.

Tuition reimbursement programs can be a powerful tool to unlock upskilling, reskilling, and retention but only when they are implemented widely and effectively.

Going beyond tuition reimbursement

Many companies view employee tuition reimbursement as somewhat of an afterthought — a program that’s implemented as a check-the-box benefit with little consideration given to how it actually connects to greater business goals. As a result, these programs are frequently ineffective, underused and don’t make an impact on long-term business objectives.

But there's an opportunity to develop a solution that removes barriers for employees and is strategically aligned to business outcomes — effectively turning an underused benefit into an impactful initiative that delivers a significant return on investment.

At InStride, we’re transforming the traditional tuition reimbursement model through our strategic, comprehensive approach to workforce education. Our solution stands out as the leading choice for forward-thinking business leaders because of these key differentiators:

Direct billing
We remove the financial burden from the employee by having academic institutions bill your company directly.
Employee learner support
Employees have access to live, on-demand education advisors who answer questions and offer unbiased support based on their individual learning needs.
Easily measurable
InStride’s user-friendly platform provides HR admins with access to real-time program performance insights and analytics.
Accommodates all types of educational backgrounds
We offer programs and courses that accommodate previous learning experience across all educational backgrounds.
User-friendly learner platform
Our easy-to-use technology platform allows learners to browse available academic courses and programs, as well as navigate eligibility requirements.