How Does Tuition Reimbursement Work?

by Keith Evans

Tuition Reimbursement is an Employee Benefit

Tuition reimbursement is a benefit offered by many medium- and large-sized companies to encourage employees to pursue higher education. The programs are highly popular among corporations because the incentive of a free or reduced cost education attracts many intelligent and capable workers, provides a tax benefit for the company and helps the organization develop a more educated workforce. The employee also benefits from assistance with educational costs, which is a major expense for many families.

Employees Must Get Approval

Before enrolling in college courses, employers generally require tuition reimbursement-eligible employees to complete a reimbursement qualification worksheet or questionnaire. This survey helps assure the employer that the student is attending a recognized, accredited institution, is taking courses that are either directly relevant to his job or are required for a major that is relevant to the job, and that the employee understands any conditions placed on the reimbursement funds by the employer. The questionnaire is signed by the employee (and usually a member of management) and then retained by the company's finance department.

Tuition Reimbursement May Have Strings Attached

To encourage the student to perform well in school and successfully develop into a productive company asset, many employers place restrictions on the reimbursement program. Students must maintain a specified grade point average, and must successfully complete each course with a predetermined grade--usually "C" or better--to receive reimbursement. Tuition reimbursement agreements often require the employee to commit to a specified number of years--obligations range from 12 months to 5 years or more--after the course is complete and provide only a few scenarios in which the employee may leave the company without being required to repay the reimbursement amount. Finally, many companies place a limit on the amount they are willing to reimburse: some companies reimburse only a specified percentage of tuition costs; others reimburse all costs up to a specified dollar amount; still, other companies pay only a portion (tuition but not books, for example) of the overall expense.

The Student Must Complete the Course and Request Reimbursement

When an employee enrolls in a college course with the expectation of receiving tuition reimbursement, he is often motivated by his own financial investment. When the course ends, the student may not qualify for reimbursement if he was unable to successfully complete the coursework or if his grade fell below the required minimum. If he was able to meet the minimum qualification standards, he simply completes a tuition reimbursement request form and submits it through the company's designated channels along with proof of costs (usually in the form of a tuition statement from the school) and proof of his grades. Company representatives review the request and award tuition reimbursement based on the established company policy, usually in the form of a "Tuition Reimbursement" line item on the next available paycheck. If the employee completed a deferment agreement with the school, he may be required to immediately settle all debts with the educational institution. If the employee paid for school with his own funds or a student loan, the reimbursement amount is simply deposited into the employee's bank account as additional untaxed funds.

About the Author

Keith Evans has been writing professionally since 1994 and now works from his office outside of Orlando. He has written for various print and online publications and wrote the book, "Appearances: The Art of Class." Evans holds a Bachelor of Arts in organizational communication from Rollins College and is pursuing a Master of Business Administration in strategic leadership from Andrew Jackson University.