What Is a Tuition Reimbursement Program?

An employer may establish a tuition reimbursement program that helps employees gain job skills. The employee pays the tuition bill and attends classes at a school, and the employer sends the employee money to reimburse the tuition bill. The employer does not have to set up its own program to train employees, which is a useful convenience.

Considerations

• The employer may only allow reimbursement if the employee takes courses that relate to the employee's job. Some employers establish broader criteria than others, and the employee may have to explain why the course is relevant on the tuition reimbursement request. The state of New York provides tuition reimbursement if the employee is legally required to take the course to qualify for the job or if the course specifically improves skills that the employee needs to perform the job effectively.

Time Frame

• An employer usually offers tuition reimbursement to employees that will be working for the employer for a long time. Many tuition reimbursement programs require the employee to work for the employee for a year or more to qualify for the program and that the employee have full-time status at the organization.

Warning

• The tuition reimbursement program may cover some educational expenses, but not others. For example, the program may reimburse the employee for the cost of tuition, but not include additional costs for textbooks or pencils and paper. The state of South Carolina only covers non-tuition expenses when the employee needs to take the course to qualify for the specific job.

Student Loans

• Tuition reimbursement programs can include coverage for previous educational bills, including student loans. The Department of Veterans Affairs tuition reimbursement program includes both grants and low interest loans from the state that reduce an employee's existing student loans.

Taxes

• Tuition reimbursement can increase an employee's taxes. According to the state of South Carolina, the IRS considers some tuition reimbursement payments taxable income, but not others. The employee may have to ask the IRS or an accountant for guidance. The employee may also have to pay state income taxes on the reimbursement payments.

Restrictions

• An employer usually establishes a limit on the amount that the tuition reimbursement program pays out. The state of New York pays a maximum of $2,000 to an employee each year to cover qualifying tuition expenses. An employee may want to wait a year to take a class, if it isn't immediately necessary, to ensure that the employer will pay the tuition bill.