How to Offer Tuition Reimbursement Benefits: Advantages, Complications, and 7 Steps to Success

There’s a face-off occurring between rising student debts and the need for employees to continuously upskill. How can employees afford to upgrade their skills and remain relevant in the talent marketplace when many are still making student loan repayments from college education completed years ago? 

It’s only natural that companies step in to shoulder employee L&D costs, and tuition reimbursement benefits are an effective mechanism for doing so. This article covers everything you need to know about tuition reimbursement, including what it is, the benefits and potential challenges, and a step-by-step guide to incorporating it seamlessly into your benefits package.

Tuition reimbursement 101

Tuition reimbursement is a system where employers pay either part or the full amount of training costs following completion of a course. Sometimes, the employees will initially bear the cost of the education, for example, by paying cash or signing up for a student loan repayment program. However, it’s also possible for employers to pay educational institutions directly. 

There are various structures and conditions that your reimbursement program may follow: 

• Academic performance: Employers reimburse the cost of tuition based on the grade achieved. For example, an “A” grade might equal a 100% reimbursement, while a “C” might only achieve 75%.
• Course types: Employers might only cover courses directly related to the employee’s current role or potential future positions within the organization. 
• Qualified educational expenses: Employers reimburse the cost of textbooks, technology, registration fees, internet, and more. 
• Institutional partnerships: Employers may form exclusive partnerships with specific education providers. 
• Loyalty: Employers might require an employee to complete a probationary period at the company before becoming eligible for benefits. Similarly, others might require the employee to remain with the company for a specified duration after course completion to retain the reimbursed funds.

How tuition reimbursements differ from tuition stipends

Though tuition reimbursements and stipends aim to foster employee growth and engagement, they operate on different principles. 

• Tuition stipends provide the allocated funds upfront or in monthly payments, so employees don’t worry about taking on student loan debt or applying for student loan assistance when seeking learning opportunities. 
• Tuition reimbursement occurs following course completion and may require the employee to front the cost of the training before filing a reimbursement claim. 

What are the pros of offering tuition reimbursement?

In a competitive talent market, student loan reimbursements can resonate with a workforce burdened by educational debt. While employee advantages are immediately obvious, there's also a clear business case for companies interested in offering reimbursement. 

1. Attract and retain employees

93% of organizations are concerned about employee retention, according to LinkedIn’s Workplace Learning report. And the number one strategy they use to combat this challenge is “providing learning opportunities.”

The benefits you offer can be a deciding factor for top talent in today’s competitive talent acquisition and retention market. Forbes reports that the average student leaves school with $28,950 owed in student loan debt—92% toward federal loans and the remainder to private companies. This is a burden that weighs heavily on many professionals. Offering tuition reimbursement signals your commitment to employee wellbeing and continuous development and can attract the right talent. 

There’s also a clear link between training and retention. TalentLMS and the Society of Human Resource Management (SHRMS)’s combined study reveals that 76% of employees agree they’re more likely to stay with a company that offers continuous training.

People leader Stefany Rowe encapsulates these points perfectly:

“I continually hear employees ask for more training to stay up on new technology, grow skills, or advance their skills. This requires an investment by the company, and generally, I’d argue a worthwhile one for those motivated employees. Tuition reimbursement programs often come with retention requirements, so you know someone will stick around. Plus, investing in employees creates more loyal, dedicated, and engaged employees. It shows you care.” 

2. Receive tax benefits 

Under the provisions of the Internal Revenue Code Section 127, employers receive a deduction of up to $5,250 per employee for tuition reimbursements made via qualified education assistance programs. The scope of qualified EAP expenses encompasses: 

• Tuition
• Books
• Essential supplies
• Course-related equipment

The benefits apply for graduate or undergraduate studies, and there’s no requirement for the coursework to be directly related to the employee’s current role. 

But the advantages aren’t one-sided. Education assistance programs are a tax-free benefit for employees, allowing up to $5,250 in reimbursements to be excluded from their taxable income and reflected on their W-2.

3. Improve employee knowledge and skills

Companies that want to stay relevant need to fund continuous learning for their workers, and those that don’t will fall behind. A Dell report states that 85% of the jobs anticipated for 2030 have yet to exist, meaning that our employees are unprepared for the future of work. A Monster survey reveals that 58% of organizations are already struggling to find job candidates with the right skills, and 29% agree that the skills gap has widened since 2021. 

This sounds bleak, but shouldering the costs of continuous learning and upskilling resources empowers employees to bridge the skills gap and remain relevant and valuable assets to the organization. By facilitating tuition reimbursements, you lay the foundation for a future-ready, skilled, and dynamic workforce. Loren Waldo, a seasoned Sales Leader, encapsulates this sentiment succinctly, stating: 

“I have always been of the mindset that continuous learning leads to mutually beneficial outcomes.”

Why doesn’t every employer offer tuition reimbursement?

Despite the clear advantages of tuition reimbursement, a 2022 SHRM report reveals that only 48% of companies offer undergraduate or graduate tuition reimbursement programs as a benefit. So, why isn’t it more popular among employers? There are four key reasons:

It can be expensive

Funding meaningful tuition programs can strain already limited resources, especially for smaller businesses. Some employers may need to prioritize essential benefits like medical coverage over tuition reimbursement.

It can be complicated

Any reimbursement program is admin-heavy compared to stipends or a flexible spending account. Tuition reimbursement can be complex as it requires submitting course completion evidence, which adds administrative tasks for the employee and the benefits administration team. From drafting and communicating clear policies to managing paperwork and establishing eligibility criteria, the groundwork is extensive. 

It can be a compliance nightmare

Tracking expenses and ensuring compliance with ever-evolving tax laws adds another layer of complexity. For many companies, especially those without a robust HR department, managing these intricacies can take time and effort.

It’s an uncertain return on investment

Investing in employee development is always advisable, but it can be difficult for a student loan reimbursement employer to track their return on investment. While the employees’ newly acquired knowledge and skills are valuable, there’s no guarantee that these will align perfectly with the company’s immediate needs. 

There’s also the age-old concern that employees might seek opportunities elsewhere once they’ve furthered their education. 

How to offer tuition reimbursement benefits in 7 steps

Implementing a tuition reimbursement program may seem daunting, but it can be seamless and impactful when you follow the steps involved in our structured approach: 

1. Set goals for your tuition reimbursement program 

To establish a clear vision, start by pinpointing your main reasons for offering this benefit. 

For example, you may want to bolster employee retention by providing enticing employee development opportunities. Or maybe your goal is to elevate the overall skill level within the organization to remain competitive and innovative in the market.

A great way to set concrete goals is by adopting the SMART framework, which stands for:

• Specific
• Measurable
• Achievable
• Relevant
• Time-bound

An example SMART goal could be to increase employee retention by 15% over the next two years by offering tuition reimbursement to all eligible employees, leading to enhanced job satisfaction and professional growth.

2. Collect employee input

Before you roll out a tuition reimbursement program, make sure your employees genuinely want and plan to use this benefit. Collecting insights on employee sentiment allows you to align your tuition reimbursement program with your employees’ needs and aspirations. 

You can use the following methods to collect employee input:

• Pulse surveys
• 1:1 meetings
• Focus groups
• Open forums
• Suggestion boxes
• Feedback portals
• Department meetings
• Anonymous polls

3. Calculate your budget

Next, you need to understand the financial implications of your tuition reimbursement program. Begin by determining the amount you’re willing and able to offer, ensuring a balance that aligns with your company’s financial health.

Benchmarking data allows you to analyze what rival companies or other industry players offer to gauge whether your proposed amount looks attractive to current or prospective employees. The 2023 Benepass Benefits Benchmarking Guide takes the legwork out of this step by providing up-to-date insights and comparisons to shape your financial decisions. Download the complete guide to dig into benefits trends and average stipend contributions by company size and industry. 

4. Determine eligibility

Define who is eligible to participate in your tuition reimbursement plan and under what conditions. To create your eligibility criteria, ask yourself the following questions:

• Is it for everyone? Reflect on whether your program is open to all or if it’s based on employment status, such as full-time workers, part-time, contractors, remote, on-site, or different levels of seniority or tenure.
• What is the course scope? Can employees only take new classes, or does the cost cover student loan repayment assistance programs allowing them to pay off existing student debt? 
• How do you plan to reimburse your employees? For example, will it be a direct payment, a percentage-based system, or another method?
• What types of programs and courses qualify? How will you ensure they align with your company’s organizational goals and skill needs?

Addressing these questions allows you to set boundaries and create a program tailored to serve your company’s and your employees’ best interests. 

5. Communicate your tuition reimbursement program

For your program to be successful, your employees need to know it exists, how it will benefit them, and the mechanics of how it works. Maximize your tuition reimbursement program’s impact by implementing a robust communication plan. As Krishna Kumar, Founder and CEO of Simplilearn, puts it:

“Tuition reimbursement programs don’t necessarily result in a great outcome unless well implemented with a very clear identification of who can take what kind of programs.”

Some excellent ways to introduce and explain the program include:

• Workshops
• Dedicated Slack channels for Q&A sessions 
• Performance management meetings
• Intranet announcements
• Email campaigns
• Town hall meetings 

6. Collect employee feedback

With your tuition reimbursement plan in full swing, regular check-ins provide invaluable insights into how the program is received and where improvements might be needed.

Start by measuring participation rates. A high engagement level indicates the program resonates with the employees, while a lower rate might suggest that barriers exist. 

Next, make sure employees clearly understand the program’s mechanics. You can gauge this through:

• Quizzes
• Feedback forms
• Feedback sessions
• Success stories

Benepass tip: Remember to act on the feedback you receive. Actively seeking and reacting to feedback ensures your tuition reimbursement program remains dynamic, relevant, and aligned with your workforce’s evolving needs.

7. Course-correct as needed 

Like any strategic people initiative, a tuition reimbursement program requires ongoing attention, evaluation, and refinement to remain relevant and effective. 

Whether quarterly, bi-annually, or annually, measure the program’s success against the SMART goals set out in the initial stages to get a clear picture of where the program stands. If the metrics indicate improvements are needed, course-correct and monitor the impact of your changes. 

How tuition reimbursement works in Benepass

A lifestyle spending account allows you to demonstrate your commitment to employee growth and wellbeing. Instead of taking a rigid, one-size-fits-all approach, you give your employees the freedom to spend their benefits on the training and development opportunities that truly matter to them. 

Here’s how it works: 

1. Choose your program: You’ll define eligible benefit categories for your Benepass Lifestyle Spending Account, such as an employee’s student loans, training courses, textbooks, or equipment, so your workers know where they can spend their money. 
2. Implement your policy: We’ll seamlessly integrate your policy into the Benepass platform and Visa Benecard.
3. Connect to payroll: We’ll link your payroll system to Benepass for a smooth and automated enrollment process.
4. Join the Benepass platform: You’ll invite your employees to the Benepass platform to start enjoying their tuition reimbursement benefits from day one.

Ready to optimize your employee benefits package and boost professional development in one move? Book a free demo with Benepass or get in touch with sales@getbenepass.com if you have any queries. Interested in exploring other types of benefit stipends? Check out our comprehensive guides below: 

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• A Guide to Work From Home Stipends (Work Stipends in 2023)
• A Wellness Stipend Guide For Employee-First Companies
• Cell Phone Stipend: A Win-Win Solution for Employers and Employees
• Gas Stipends: How They Work and Common Questions
• Offering Fertility Benefits to Your Employees: Everything You Need to Know
• How to Offer the Best Childcare Benefits for Employees
• A Guide to Professional Development Stipends: 6 Reasons to Offer L&D Benefits