5 Things to Know About Tuition Reimbursem*nt Programs (2024)

Just because you’re on the job doesn’t mean you can’t keep building on your education—and employers are offering more help than ever before.

Tuition reimbursem*nt programs have come a long way over the past few years, eliminating barriers such as upfront tuition payments and reimbursem*nt paperwork that have kept employees from taking full advantage of education benefits offered by their employers.

Nowadays, nearly half of all employers offer undergraduate or graduate tuition assistance. As The Wall Street Journal newsroom reported, last year Amazon expanded its education benefits to boost its recruitment efforts. The retail giant now covers undergraduate college tuition for eligible employees in the U.S. Target and Walmart have also announced tuition reimbursem*nt programs, joining the ranks of Deloitte, Bank of America, Home Depot, UPS, FedEx and Chipotle.

Starbucks covers 100% of tuition for a first bachelor’s degree for full-time and part-time employees. Many government jobs offer similar benefits. Houston-based Waste Management, or WM, doesn’t just pay for an employee’s tuition, it announced a program to cover tuition for spouses and children last year.

If a company you’re considering doesn’t detail its education benefits on its public-facing website, ask human resources representatives if they can provide that information. Here are five things to know about tuition reimbursem*nt programs:

1. Some companies will pay your tuition up front

Historically, tuition assistance programs have required students to follow specific rules, pay expenses up front and wait to be reimbursed. That’s changing as companies embrace “no-cost” options that don’t require students to make out-of-pocket payments, says Jill Buban, general manager at EdAssist by Bright Horizons, a company that works with other companies to implement education benefits programs.

Companies pay school bills directly, eliminating the need for reimbursem*nts and upfront payments. These programs also make it easier for students to access benefits by minimizing paperwork and potential costly mistakes.

Disney covers 100% of tuition and pays upfront at more than a dozen schools within its preferred network, including the University of Arizona, North Carolina A&T State University and Cal State Fullerton. Chipotle moved from a reimbursem*nt program to making tuition payments up front for employees in 2019. Walmart and Sam’s Club also pay tuition upfront through their education benefits programs.

2. You don’t have to pursue a college or graduate degree

You don’t have to get a degree from a traditional university to take advantage of an employer’s tuition assistance. Companies often cover programs that lead to certificates and skills development instead of diplomas. Many of these programs can be completed in months instead of the years it would take to earn a degree. They also tend to offer more flexible enrollment requirements at a fraction of the price.

Some certificate programs require a bachelor’s degree but others don’t. And in some cases, certificate holders without bachelor’s degrees can earn as much or more than non-certificate holders with bachelor’s degrees, according to the Georgetown University Center on Education and the Workforce. In Ohio, for example, industrial technology certificate holders earn a median of $65,000 above the $45,700 in annual median earnings for people with bachelor’s degrees.

Some employers only cover tuition for students enrolled in specific types of programs, but others give employees more choice in what they study and cover online learning programs like Coursera.

Right now, data analytics, project management and healthcare certifications are in especially high demand among employers, as are Scrum Master certifications, Buban says. Scrum Masters are hired to work as facilitators on Agile development teams.

3. You may have to compromise on where and what you study

Some companies will only reimburse for certain areas of study and degrees—and also have limits on which schools are eligible. While Starbucks covers college tuition for part-time as well as full-time employees, students have to study online at Arizona State University where they’ll have their choice of over 140 bachelor’s degree programs. Walmart covers tuition for more than 60 programs at a more than a dozen schools.

“It’s basically a matter of understanding what degrees are approved by your program, what schools are approved by your program,” says Laura Redfield, a former human resources adviser who earned a Master’s in Administration and Organizational Development through a tuition reimbursem*nt program.

In addition to limiting school choice, some programs only cover a portion of tuition up to a specific limit. Allstate, for example, will cover up to $5,250 in educational expenses per calendar year. And if employees leave voluntarily within a year, they’ll have to repay those funds. More than half of the companies offering education benefits have similar stipulations, according to a 2019 survey from the International Foundation of Employee Benefits Plans.

Pizza Hut offers employees 51% off tuition, but only at Excelsior College, a private online university in Albany, New York.

The scholarship website Scholly maintains a list of 50 companies that offer tuition assistance and includes details on limitations on where students can study. Employers tend to focus on covering programs that teach the skills they need in-house, something employees looking to switch gears may not find as valuable.

4. You may have a tax bill

Depending on how your employer’s education benefits work, you could find yourself on the hook for additional income taxes. The Internal Revenue Service allows students to collect up to $5,250 in tuition reimbursem*nts tax-free each year, a figure that hasn’t risen in 30 years despite soaring education costs. That’s enough to cover just over two classes a year at public postsecondary institutions where the average cost per course is $2,355, according to the Education Data Initiative. At private universities, the IRS maximum tax-free tuition reimbursem*nt benefit is about enough to cover one course per year.

Employees face income taxes on education expense reimbursem*nts over $5,250 a year. Many companies avoid this scenario by matching their benefit levels to the IRS maximum or by directly paying for an employee’s education, eliminating the reimbursem*nts—and potential tax liabilities—altogether.

If your company goes over the IRS limit and doesn’t directly pay your school, you’ll want to set aside money to cover the additional income taxes you’ll owe on reimbursem*nts over $5,250 in a single year. The University of Pennsylvania estimates tax liability at 36% and withholds taxes from education benefits reimbursem*nts over $5,250.

5. You can expect a career boost

Using your job’s tuition reimbursem*nt benefit can set you up for a new, higher-paying opportunity. People with professional or doctoral degrees can earn a median of nearly $600 a week more than the average for workers with a bachelor’s degree. For master’s degree holders, that figure is nearly $250 a week. An associate degree alone can drive up median weekly earnings by nearly $1,000, according to the Bureau of Labor Statistics.

The Lumina Foundation conducted a handful of studies to determine benefits of these programs that go beyond higher earnings. Those studies examined programs at companies including Cigna and Discover Financial Services found employees enrolled in tuition assistance programs were more likely to be promoted and more likely to stay with an employer.

At Cigna, the Lumina Foundation found that enrolled employees were 10% more likely to be promoted and 8% more likely to stay with a company than employees who chose not to participate. Meanwhile, their average wages rose 43% over a three-year period.