Tuition Reimbursement: do you know the Rules of Employee Assistance?

tuition reimbursement, Valerie Thompkins

Estimated reading time: 4 minutes

Tuition Reimbursement: The Rules of Employee Assistance

Before I finished undergrad, the plan was to graduate and begin a Master’s program and land a graduate assistantship to cover tuition.  The summer after junior year, my internship turned into a full time job with benefits such as tuition reimbursement.  Tuition reimbursement is an employee benefit which an employer pays an amount of costs towards tuition, fees, and books. The recipient must first front the cost of tuition & fees out of pocket or using loans, then apply for reimbursement at the end of the semester after showing proof of a passing grade.

The Numbers

Employer tuition reimbursement is tax-free for up to $5,250, as established by the IRS. The IRS requires employers to report this wage of tuition benefits in an employees annual income. My employer offered up to $15,000 per year, meaning each dollar I received over $5,250 was taxed. For me, this meant spring semester would be reimbursed nearly in full. (Summer and Fall semesters would be reimbursed an amount minus the taxes.) I was well aware of the tax obligation, yet I lackadaisically accounted for $15,000 of “free school” each calendar year, although I never once received the full $15,000 amount in reimbursements. I was applying the money directly to the FAFSA loan that I took out for the program. In the end, I estimate that I received in around $12,000 of the $15,000 offered in reimbursement.

Read the Policy. Read it Again.

Tuition reimbursement is undoubtedly valuable, if you can abide by your company policy and accept the risks and consequences.  It is important to understand the true commitment of money—and time. Not only is reimbursement taxed, policies may require employees to remain at the company a number of years upon graduation. For me, that number is 3. 

This is a huge lifestyle decision. It could mean committing to one city and settling for a period of time, unless your company allows relocation within their policy. I was also required to maintain a high grade average and earn no more than two C’s over the  course of the program. In graduate school, anything lower than C is failing, and poor performance is not eligible for reimbursement. 

Before enrolling in a tuition reimbursement program, consider your short-term career goals. I evaluated my current role and opportunities to develop and expand.  Today, with 1 of 3 years of my required commitment down, I am confident I will continue to grow with my company.

Free Tuition

One way to mitigate the tax issue is to only take $5,250 in courses (~two classes a year).  This would be the most economical option, as you would receive reimbursement for the entire $5,250. The cost is taking 4+ years to complete the course requirements. I wanted to graduate in 2 years, so I went to school all three semesters and racked up nearly $20,000 in annual in tuition costs. I easily surpassed my employer’s generous $15,000 offering, so I prepared to have a balance left on my loan even after reimbursements.

Opportunity Cost

Thanks to tuition reimbursement, I was able to complete my MBA program without skipping a beat in my career. Although my social/personal life took a HIT, I know that I won professionally and walked away with minimal debt, under 18k. My priorities were to earn my MBA without compromising my full-time salary, benefits, and consistent work experience. I encourage other women to take advantage of tuition reimbursement if you are in a good place with your company to make such a commitment. If I were to depart from my company on my own terms, I would owe a percentage of the reimbursement amount back, so be sure to measure the risk vs. reward.

closeup of a calculator and paperwork to illustrate a piece sharing advice about MBA company sponsorship and tuition reimbursement from Valerie Thompkins

Are you looking to secure company sponsorship / tuition reimbursement for your MBA? Read more in how to pay for your MBA. Interested in contributing to MBAchic?
Come share your advice and experiences with our community!

Images by PxHere, MBAchic and Valerie Thompkins

About the author

Valerie Thompkins
Valerie Thompkins

Valerie Thompkins is a 2019 MBA graduate of Baldwin Wallace University. She works as a project coordinator for the Federal Reserve Bank and currently plays a critical role in managing the Pay Check Protection Program, an effort of the 2020 CARES Act to provide over $5 million dollars in economic recovery during the pandemic. She is passionate about writing, education, and financial literacy. Follow along on her blog and Instagram.