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Tuition Reimbursement: A Benefit for Some Employees and Employers

This article was written by in Career and Work, Education. 13 comments.


Happy anniversary to Consumerism Commentary! Nine years ago today, I published the first article on this website, introducing myself and sharing the original purpose of Consumerism Commentary. The character of the site has changed drastically over this extended period of time, but I’m glad to say I’m still involved with its operation. Thanks for everyone’s concern over the past couple of weeks; my disappearance wasn’t due to any type of family emergency. I had some business to take care of that kept me away from writing.

Several years ago, the company I worked for offered — and most likely still offers — a benefit I find valuable: a free education. Included in the benefits package was reimbursement for certain tuition expenses. The company would pay ninety percent of all costs of obtaining a bachelor’s degree in any field as well as the same percentage of expenses for earning a master’s degree related to the employee’s field. Job-related certifications were also covered by the employer. There were some caveats for receiving the reimbursement, but there weren’t many hoops to jump through.

I took advantage of this benefit by pursuing a master’s degree in business administration. I value continual education in my life, and I saw a chance to earn a degree — one that might help me learn about a field that could help me in my day job as well as in what was becoming a profitable side-job — at a greatly reduced cost, I took the opportunity.

Not every company should offer this benefit, though, particularly not with strings attached. I’ve discovered that other employers do attach strings. Some companies offer reimbursement for education, but require a high GPA in order to receive the full benefit. My company required just a “C” grade average in order to receive full reimbursement when I took classes towards my MBA; now the company offers reimbursement on a sliding scale, offering the full benefit only to those with an “A” grade average. While my company didn’t have this policy, some require employees to remain employed with that particular company for a certain amount of years after completing the course in order to avoid paying back the reimbursement. Five years is a typical restricted period.

The concern among employers is that talented employees will use the company’s resources to earn a degree and quickly leave for a better job — or a better company. When the employer agrees to pay for its employees’ education, it is making an investment in those employees. The degree should help the employee “perform better” in some capacity. In many cases, that would mean either driving more revenue or reducing more expenses. If, however, the employee earns a degree and leaves, the company won’t be the beneficiary of that investment. Companies don’t cover employees’ costs for education out of their belief in the value of lifelong learning, it’s a calculated investment designed to have a financial benefit to the company and its owners.

This shouldn’t be a concern. Good companies attract good employees, regardless of the definition of “good.” If the company provides opportunities for employees at all levels, a worker with a fresh degree doesn’t have to look outside in order to take advantage of new skills or qualifications. Only the companies without confidence in its own ability to attract qualified employees need to handcuff its employees who seek additional education — generally a more ambitious group than average — to the company for several years.

It wouldn’t make sense for a pharmaceutical company to reimburse an employee pursuing a master’s degree in stage management. A degree in chemistry would be more appropriately tied to that particular job. Depending on the role, however, the employee can argue that an advanced degree in a field drastically different than the core business can be used to improve job performance. For example, a salesperson or someone in a marketing role can benefit from studying psychology at the bachelor’s degree level, if his or her educational focus is on understanding what drives people to make decisions as a consumer. It’s a stretch, but it’s possible. Pursuing a master’s degree or doctorate in psychology may only make sense for someone wishing to pursue a career in psychology or a related field, so that argument for reimbursement of an advanced degree would be more difficult for the employee to make. It may indicate to the company that a career change is imminent.

During a recession, tuition reimbursement is often one of the first benefits to be cut and one of the last to be reinstated when the company’s fiscal health has improved. many companies that did not eliminate their reimbursement benefits established new limits. A typical reimbursement cap of $2,500 would have hardly paid for my relatively expensive Master of Business Administration degree. It would have hardly made a dent for a co-worker who also pursued his MBA — but at the more expensive Columbia University.

The overall value of business degrees, graduate degrees in general, and even any college education, is constantly being called into question by the media, particularly financial media. The marketplace of employees may be saturated with MBA degrees looking for work, a graduate degree in some fields never recovers its cost through increased salaries, and the bachelor’s degree is so widespread that its attainment is almost meaningless other than being a base requirement for any job. As these questions continue, companies will be more likely to question the value of tuition reimbursement.

Does your company offer tuition reimbursement? Have you ever taken advantage of the benefit? Would you leave your company after achieving your desired education goal in search of better opportunities?

Photo: janoma.cl

Published or updated July 16, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 13 comments… read them below or add one }

avatar tom

My company does… and I fully utilized it to the tune of a $50,000 engineering masters degree.

They actually used to have completely unlimited tuition coverage with no strings attached except a minimum grade of B- or better.

This recently changed. They implemented annual caps of $15,000, tightened up on the allowable degrees (must pertain to your field), you cannot participate in the program until you had been at the company for a year and you must stay with the company for 2 years.

That last change, the 2 year requirement, used to be an incentive… 100 shares of stock with a 5 year vesting period. Unfortunately, I did not finish my degree before that change was implemented.

The best part about my company’s program, is that it is all up front payments. The only reimbursements are for books and fees.

I wholeheartedly believe that if you are not participating in these programs if offered, then you are a fool.

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avatar Luke Landes ♦127,455 (Platinum)

Tom,

I agree with your last statement. It’s in everyone’s best interest to take advantage of any benefit offered as much as possible… and a free or greatly reduced expense for education is one of the best benefits a company can offer to grow its employees’ human capital.

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avatar Steve

My company offers adoption assistance. Am I a fool for not taking advantage of it?

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avatar wylerassociate ♦162 (Cent)

My company offers tuition reimbursement but I haven’t take advantage of it yet. I would consider leaving my company for a better opportunity but given how shaky the economy is right now I’ll wait it until I see better economic growth & stability.

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avatar krantcents

Many large companies offer this benefit, but not mine. I work for a school district as a teacher. You would think that an education organization should offer it, but they don’t. Getting a Masters will increase my pay by $500 a year! Maybe, an additional degree does not help in in education.

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avatar Shona

My employer offers tuition reimbursement on a sliding scale…depending on grades. Unfortunately for me, I only have 1 course left to take in my MBA program. So I’ll be saving a little; but it’s a far cry from getting my degree for free. The ironic thing is that I used to work at a university previously. I secured that position before finishing my undergraduate degree. When I made the decision to go to graduate school, I thought that I would go ahead and do so at the same university where I worked. However our contract was re-negotiated and the benefit to get a tuition waiver for graduate courses was taken away (you could still get a tuition waiver for your bachelor’s degree). This was initially a surprise to me. But then I realized, the university was aiming to keep its staff competitive with their peers; but not give them the opportunity to truly improve (and then move up and out). I say that because the vast majority of recent hires in my position (and in similar ones) already had bachelor degrees. Long-term employees (people who had been there for 20+ years or so) were the only ones who were not college graduates already.

(However children of staff members could still obtain a tuition waiver….which is a great benefit, but didn’t apply in my case.)

In today’s workforce, I do not feel that employees owe any sort of debt to employers who offer tuition assistance. Gone are the days where you worked for one employer for 30+ years. Employers and employees should expect that their relationship will be a mutually beneficial, yet temporary one. With that being said, I don’t think that tuition reimbursement needs to be handed out indiscriminately. There should be grade expectations, time and cost limits as well as the right to only reimburse an employee for studying certain subjects.

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avatar gina

Yeah and they are not doing it solely out of the goodness of their hearts. It’s a tax write off for them….yes?

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avatar Luke Landes ♦127,455 (Platinum)

Correct, there is a limited tax benefit for education expenses as part of a fringe benefits package. The tax break just consists of not including the value of the benefit as part of the employee’s wages. Unless I’m not reading the tax code right, from a corporation’s tax perspective, offering the benefit and taking the exclusion is equivalent to not offering the benefit at all. This seems to mean that if a corporation chooses to offer the tuition assistance, they can exclude it (or part of it). Offering the benefit doesn’t seem to be a “net positive” tax advantage over not offering the benefit.

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avatar William @ Drop Dead Money

Good for you, Luke, to have availed yourself of the opportunity! I, too, got my MBA through my employer at the time, and I’m still grateful for that. I ended up being the HR manager for a while during my MBA studies, and I remember how surprised I was that so many talented people were not interested in improving themselves. We pursued them and tried to encourage them to invest in themselves. The company invests what is has (money) and the employee invests what he or she has (time). It’s more comfortable for both to not do it, but the future for both is better if they do. Those that make the investment benefit both themselves and the company.

As the economy eases up a little, more training/education dollars will become available. In my book it’s the biggest perk of all. This post is a timely reminder for everybody wanting to get ahead to grab as much of this as they can.

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avatar Lance @ Money Life and More

My company offers some form of tuition reimbursement but I’ll really have to look into it to see if it is worth it to me. An MBA would add a lot of time to my already busy schedule and I’m not sure how much value it would add. I have my CPA license and I feel that is the gold standard in accounting.

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avatar Squeezer @Personal Finance Success

I worked at a university, and you could attend their classes up to 6 hours a semester tuition-free. Or if you went to a physical (not-online college) you could be excused up to 4 hours per week with paid leave. However, I quit working there, but my new work paid me slightly more, enough to cover my paying tuition out of pocket.

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avatar Evan

H,

Just wanted to say congrats on hitting 9 years! Amazing ride buddy

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avatar Richard A. Miccio, Esq.

I worked for Con Edison of New York for 35 years and they paid for my education and I became an attorney with the expectation and desire to work in their Law Department. They decided after paying all that tuition money not to offer me a position in their law department. I would have worked my heart out for the company in gratitude but they would not have any of it. Go figure?

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