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Rejuvenating Tuition Reimbursement Programs

A veteran in educational assistance schools HR in setting up programs that boost employee engagement while growing a company's talent.

Successful employers recognize the importance of enabling employees to reach their personal goals while also creating a pool of qualified staff to contribute to the business. A tuition assistance program can be a valuable way to do that. Indeed, according to a 2013 Society for Human Resource Management survey, 61 percent of employers offer a tuition assistance benefit for undergraduate pursuits, although these policies and practices vary greatly.

Benefits for college education expenses have come a long way since I was an HR/benefits administrator in the 1970s. Nowadays, I’m on the other end of the professional education spectrum: I work in the business office of a career college with an online division. I’ve navigated a steady stream of employers’ tuition reimbursement and educational assistance benefits with student-employees over the years.

HR managers know that facilitating the development of human assets is not always easy. As someone who’s been around the block a few times, I can help.

Assistance on Tuition Assistance

Is tuition assistance on the agenda for your next departmental planning session? If so, here are some recommendations to consider:

Make your policy understandable to all. Make sure collateral materials are widely available and understandable to younger employees who aren’t accustomed to insurance claims, expense account reimbursements or financial forms. Tuition assistance is not worth much when people don’t understand it well enough to use it.

​Consider a 50 percent total reimbursement model. Many companies choose to reimburse up to $5,250 per year, which is the ceiling that the federal government allows for tuition benefit expenditures to be exempted from withholding tax. At today’s prices for higher education, that may not take a student very far. Your employees may be more motivated to finish a degree if assistance is spread over a longer period of time.

Thus, employers might change their policy language from stating that they will reimburse “100 percent up to $5,250 per year” (which students would likely use up within a few months) to “50 percent up to $5,250 per year” (which would extend at least six months).

Adjust the time frame to match employment dates. An artificial year-end time frame on a tuition reimbursement policy can be adjusted to a fiscal year or an employee anniversary date instead. Most companies have already made this adjustment for vacation and sick benefit accruals. You’ll achieve a more even workflow without extra bottlenecks in December/January when other year-end fiscal activities are occurring.
Be flexible about end dates. Unfortunately, today’s market dynamics also include layoffs, which rarely happen neatly at the beginning of a pay period or between semesters. Most tuition reimbursement policies attempt to make good for the student-employee until the end of a class or term; this can be a way to handle the issue fairly and humanely.
Ask employees to share what they’ve learned. Your students could recap some major course principles to a group of co-workers, which spreads the educational value of your investment and encourages other employees to take advantage of the benefit.

A Matter of Degrees

​Many of those in the education community like tuition assistance for two reasons. First, having financial support increases the likelihood that students—especially younger ones who may have many debts and fiscal challenges—will actually complete their curriculum. Second, it instills in students accountability to someone besides themselves, which can boost both their grades and their motivation.

Most colleges and employers focus their educational outreach efforts on in-demand computing, business/accounting and health care skills. With advances in technology and the increasing availability of massive open online courses, employers may soon be able to tailor online programs to provide the exact mix of educational offerings that will meet their needs.

Employers typically start the process by supporting courses or programs that are job-related, or degrees that can be reasonably expected to lead to a position at the company with more responsibility. The most progressive approach I’ve seen is employers paying for any course work that will improve an employee’s ability to think, make decisions or just keep current.

​Operations that include many younger employees often make tuition assistance a lead item in their benefits offerings; some even make it available to part-time employees. Salt Lake City’s robust call-center industry, for example, is quite generous to its part-timers, especially considering that many of them stay with a company only for a short time. Employers shouldn’t overlook tuition assistance just because their industry has high turnover; although you may not get any lifers by offering tuition assistance, you could increase average tenure from several months to two to three years—a big improvement.

The most generous employers tend to be in the technical or health care industries. Companies that have to compete locally with these industries for computer, accounting and even entry-level personnel might want to compare their tuition assistance benefits to those of competitors. Although companies outside of health care may have no interest in helping employees pursue a nursing degree, they could gain a competitive edge by supporting some prerequisite classes that hone more-general technical skills.

Metrics and Technology

​Very rare is the employer that offers 100 percent reimbursement. Nonetheless, policy language might inadvertently imply as much, so make sure that the language you use is clear. Unfortunately, many company descriptors are confusingly worded: They open with “100 percent of books and tuition are covered” but end with the more modest “up to $5,250 per year”—the ceiling that the federal government allows for tuition benefit expenditures to be exempted from withholding tax. Use of the $5,250 cap is the only real consistency I’ve noticed among the hundreds of policies I’ve reviewed.

Employers can account for the funds over a fiscal year but more often use the calendar year. Many employers have a service requirement (the student-employee must agree to stay with the company for a year or more after completing course work or earning a degree, or else must repay some or all of the tuition assistance).

Most employers reimburse employees only after they complete their courses—grades come out, a statement is generated by the school, and the company reimburses the employee. Increasingly, companies seem to be requiring that employees get authorization before they embark on a program (that is, employees must work with their manager and/or HR to select an appropriate degree program or individual courses and must set up a budget presuming continued eligibility, satisfactory grades and other requirements).

​Some colleges will complement an employer’s tuition assistance benefits. One of our affiliates, for example, matches $5,000 for an associate degree, $10,000 for a bachelor’s and $3,000 for a master’s. (These amounts are per degree and not per year.) This is an outstanding opportunity to clear up part of a student’s financial obligations and make repayment on federal loans more manageable. If a student-employee can garner some combination of $10,000 to $20,000 in tuition assistance and match on their account, that could reduce their post-graduation repayments by $100 to $200 per month. Should there be a surplus of any kind because of employer or school largesse, federal loan monies can be refunded.

At the same time, many employers are prohibiting so-called “double-dipping” (that is, allowing student-employees to receive both tuition assistance and educational funding given through scholarships, military coverage or nonrepayable grants). Some of these funding sources can approach full coverage and living expenses. The big items here are Pell grants, which low-income students qualify for, and veterans’ benefits. It’s easy enough for a school to carve other funding sources out of a tuition budget plan and then render a per-credit calculation more in line with a given employer policy. However, most federally supported tuition comes through Title IV subsidized and unsubsidized loans from the U.S. Department of Education, which do need to be repaid.

Most federally supported tuition comes through Title IV subsidized and unsubsidized loans from the U.S. Department of Education.

Most of our students carry a 10 percent funding gap (the amount not covered by federal student loans or grants) during their matriculation, and this is where tuition assistance can be most helpful. The typical student will have deferred federal loans to repay when he or she graduates. Any assistance that can ease that burden will make repayment that much easier. Though laid out well at enrollment, Title IV financial aid can fluctuate based on income and annual re-evaluations of need, family contribution, and other factors.

Employers’ procedures for processing claims are all over the map. Some vendors will automate everything for an employer (akin to managed care administrators in health insurance); one such provider follows a pre-authorization approval with a tickler e-mail reminder and request for a grade to be submitted. Another sends a sponsorship letter to the school during authorization.

As for grade requirements, most employers generally reimburse for Cs and above. A handful might reimburse only at higher levels, for an A or B. Claims generally have to be submitted within 45 to 90 days after a course is completed.

Some companies have started to closely monitor their reimbursement expenditures to student-employees to ensure that the monies provided actually reach the learning institution’s account. For struggling young families, it can be tempting to redirect the funds elsewhere, although of course that will only lead to more debt after graduation. Some employees are never told and thus don’t realize that they need to forward tuition assistance to their college. I recently encountered a student who said her employer told her to use the reimbursements however she saw fit!

Communicate Early and Often

​A company’s benefits package is often referred to as the hidden paycheck. So why isn’t tuition assistance, one of the key parts of that, more widely used? Some student-employees tell us that the terms and conditions of company tuition assistance programs are not necessarily too confining but rather too confusing to deal with.

​A company’s benefits package is often referred to as the hidden paycheck. So why isn’t tuition assistance, one of the key parts of that, more widely used?

As I mentioned earlier, it’s not uncommon for a policy to open by saying the company reimburses “100 percent” and to close with “up to $5,250 per year.” Although $5,250 per year is nothing to scoff at, this type of mixed message contributes to employee consternation.

Another common source of miscommunication has to do with how and when the money is provided. All too often, student-employees have no idea that they’re getting a larger paycheck that contains tuition monies; this is particularly true for people who regularly work overtime and are accustomed to variable paychecks.

​The best way to ensure a smooth process for the student-employee and his or her chosen school is to make sure all employees receive a copy of the company policy, benefit description and claim form at the outset. For some reason, certain employers are reluctant to make these documents widely available, but without them, the school and employee are working without a structure and opportunities for misinterpretation abound.

Academic attendance cycles can be another communications challenge. There are no longer just semesters or school years. Now we have “modules” (monthly intervals at our school). Further, the Title IV language dictates “terms” and “academic years” of four months each.

This is not anything that colleges can control; they can no more standardize these terms than employers can normalize workers’ comp practices across 50 states. Any school authorized to disburse Title IV monies, where most matriculators gravitate, will be subject to Department of Education requirements about academic progress, completion, placement and so on.

Tuition assistance programs can be a very valuable way to invest in your people, but they will only be as successful as the program design allows them to be. Organizing and implementing a program takes a lot of time, thought and relationship building. Heading this effort is a great opportunity for HR to shine and do what it does best: leverage human capital.

Tom Cherry is a senior planner with Independence University in Salt Lake City. He has been a hospital personnel director and administrator in three states and has taught HR at the college and community college levels.