Paying for College with Employer Tuition Benefits
Sometimes even the best laid plans for college financial aid do not produce enough results to fully fund your higher education. When that happens, where do you turn? Well for most students, the answer probably is to apply for student loans. There is no doubt that loans can help you pay for college, but if you want to get through school without debt, you will need to get a little more creative.
One avenue that is worth exploring is employer tuition assistance. According to federal law, your employer may provide you with up to $5,250 in benefits, tax free, each year to cover undergraduate or graduate courses. Students do not need to be seeking a terminal degree.
It is also permissible for an employer to refuse to reimburse you unless you meet certain requirements, such as attaining a certain grade, taking certain classes, or agreeing to remain employed for a certain amount of time after you complete your degree.
Payment above this tax-free threshhold of $5,250 are also allowed, presuming they are mutually agreed upon by both employer and employee, but they may not be eligible for tax free status. Refer to sections 162 and 212 of the IRS tax code for more information.
In 2003-2004, 8.7% of undergraduate students received an average of $2,087 in employer-supported tuition assistance. 20.5% of graduate students received assistance, averaging $3,003. In addition, 41.5% of MBA students also received assistance, averaging $4,478 per year.
Most companies base the amount of award on the employee’s pay grade, so the more you make, the more you can earn in tuition assistance. Also be sure to clarify when payment is disbursed. Some pay upon enrollment, but others require you to take and complete the course (often with a satisfactory grade) before they will cut the check. In this case, you must first pay for coursework yourself, so make sure you have the resources to cover the bill. You may elect to take out loans at the beginning, and then plan to use your tuition assistance to pay back the loan. If so, make sure you have the resources to handle the loan repayment, if your employer should decide for whatever reason not to pay you back and you get stuck with the bill.
If you are interested in pursuing this route, the first thing to do is to approach your HR office to see whether they have established tuition benefits. If not, try setting up a meeting with your supervisor to ask if he or she would be willing to apply for tuition assistance for you. It never hurts to ask!