An Employers Guide to Tuition Benefits

Whether called tuition reimbursement, tuition assistance or the more generic “education assistance programs,” tuition benefits programs have been described as a win-win strategy for employers to attract new hires and upskill, reskill and retain existing employees.

What is tuition reimbursement? It’s an arrangement between an employer and an employee in which the employer agrees to cover a percentage, or all, of the employee’s tuition cost for a college degree, certification program or other form of education. There are typically certain requirements which the employee must meet to qualify for the benefit, which can include the specific type of coursework to be studied, and notably, paying the full tuition price before they’re reimbursed by the company. Other forms of tuition benefits programs don’t require the employee to pay for their education “up front” and we’ll discuss that in another section of this article.

How is a tuition benefits program different from other employee benefits? Health insurance, dental care and retirement plans are considered part of an employee’s overall compensation package, and therefore are much more likely to be a top-of-mind item for both employer and employee.

In 2019, 47% of employers in the United States offered undergraduate or graduate tuition assistance. There is evidence to suggest, however, that employers have a long way to go in adopting some aspects of tuition assistance programs.

While 71% of HR leaders indicate investing in training and development is their top strategy to attract and retain frontline workers, only 9% of organizations are incorporating tuition assistance or reimbursement into their strategy, and according to a 2022 summary of employee benefits by the U.S. Bureau of Labor Statistics, only 4% of private-sector workers had access to student loan repayment benefits.

A tuition assistance program can deliver several benefits to both the employer and employee. Consider the typical employee’s point of view. In a study, 25% of college-age adults said the cost of tuition was their main reason for not pursuing higher education. Faced with paying their own way, there is little incentive for them to advance their careers. From the employer’s perspective, a costly and complex learning and development (L&D) program may not be practical when faced with the need to skill up workers to meet new demands or create a talent succession plan. An employer tuition assistance program, however, could be an actionable solution for talent acquisition, retention and employee engagement.

Consider the following benefits:

The Lumina Foundation’s research also indicates that, in spite of nearly half of employees offering tuition assistance programs, only 2-5% of eligible employees, on average, utilize these programs and 43% of working adults are unaware the benefit is available to them. McCoy says this clearly indicates the need for better internal employee communication and alignment of upskilling and reskilling initiatives with organizational strategies. “If only a small percentage of their workforce is aware this benefit is being offered, employers need to re-prioritize education and double down on their efforts to show employees how dedicated they are to skill-building initiatives and that they really do want their workforce to take advantage of the benefit,” she emphasizes. 

Public-sector employers, from branches of the expansive federal government to small municipalities, face unique challenges when competing with the private sector for talent. Traditionally, the public sector has been generally unable to match the salaries offered by the private sector. A so-called “silver tsunami” of retiring baby boomer generation workers has been magnified by the post-pandemic “great resignation,” making their need for an adaptable and resilient workforce even more urgent as they struggle to replace retiring workers with new hires.

A 2021 study of state and local government employee sentiment revealed that more than half of all workers in the sector (52%) were thinking of leaving their jobs and 25% of those considering changing jobs indicated they’d like to leave the government sector entirely. McCoy notes that, while the tax incentive does not apply to them, public-sector agencies need to consider how to use the development dollars in their overall budgets as efficiently as possible and channel them toward upskilling and reskilling programs that include employer tuition assistance.

Employers typically lay out the specifics of their tuition benefits programs in employment contracts. It’s common for companies to set forth eligibility requirements, which may include:

The terms tuition reimbursement and tuition assistance are often used interchangeably, but while they offer similar benefits to both the employer and employee, there are clear differences between them.

In an employer tuition reimbursement program, the employee pays for their education up front. Upon completion, which entails meeting the requirements set forth in the company’s tuition benefits program policy, the company reimburses the employee for some or all of the cost of their tuition.

Tuition assistance, on the other hand, is a process by which the tuition and fees for an employee’s education are paid upfront by the employer or deferred in some way through a partnership agreement between the employer and the educational institution. The employer can still attach certain restrictions – designated schools, qualifying programs, minimum GPA, timeframe requirements, etc. – but the primary difference here is that the need for the employee to pay for his or her tuition out of pocket is significantly reduced or eliminated altogether.

Why does this matter? The difference between these two tuition benefits models can have significant implications for employers’ upskilling and/or reskilling initiatives. Tuition reimbursement programs can put a financial burden on employees who do not have the financial means to pay tuition upfront and wait to be reimbursed. For many workers who are in a position to benefit the most from such a program, such as front-line employees and entry-level careerists, an inability to finance their education due to poor credit or no credit represents a very real obstacle to their upward mobility.

“With a tuition reimbursement policy where someone’s having to pay for their tuition upfront, you may be shutting out a demographic group that may not have access to credit cards, can’t carry a card balance or doesn’t have a credit score that would warrant them getting a loan,” says McCoy.

Tuition assistance programs, while ostensibly being more attractive to front-line employees with limited access to credit, can be problematic for employers who don’t align their programs clearly with skills pathways.

When employers fail to offer direction as to qualifying programs and schools, employees can end up taking coursework from institutions that are not geared toward working adult learners. This can lead to a lose-lose scenario for both employer and employee, with a low percentage of employees completing degree programs, their accrual of more debt over and above the amount paid by the employer and, ultimately, employees having a negative view of their employer.  

According to DeVry University Chief Inclusion, Belonging and Equity Officer Veronica Calderon, employers may not be doing enough to be sure their tuition benefits programs align with their stated Diversity, Equity and Inclusion (DEI) policies. In fact, in a 2020 survey of 113 corporate HR leaders, 88% felt their organization had not been effective at increasing diverse representation.

What do employees think? A 2021 survey shows that employers and workers agree their organizations have made strides in advancing DEI in the workplace, but while 94% of employers report an organizational commitment to DEI, only 74% of workers report the same. This indicates the need for employers to make their DEI work more visible to all employees, or to do more to meet employees’ expectations. 

Calderon describes education as “the greater equalizer” and emphasizes the importance for individuals from underrepresented groups, income levels and career roles to have an equitable  opportunity to pursue higher education. Regarding the inherent inequities in some tuition reimbursement programs, she says, “It’s important for employers to avoid being their own worst enemies by maintaining tuition benefits policies that lack inclusivity and shut out the very people who could benefit the most from them.”

Calderon also points out the need for employers to address the traditional lack of diversity in certain departments, like many STEM roles. She says, “We challenge ourselves and others to look beyond our traditional talent pools for roles that currently lack diversity. Let’s build these leaders from within the organization by giving them the skills and education they need to pursue a new career in tech. Let’s focus on our BRGs (Business Resource Groups) and ERGs (Employee Resource Groups) as the talent pipeline. Offering tuition  benefits may be a small step forward, but it’s not enough.  Leaders need to be proactive and intentional.”

What does an inclusive tuition assistance policy look like?

An increasingly competitive business environment, tight labor market and increased employee interest in personal and professional growth add up to the need for organizations to implement smarter and more effective tuition benefits programs.

Employers should understand why they’re offering tuition benefits, going in with “eyes wide open” and aligning their education programs with specific needs to fill current and projected talent gaps. They should also be advocates for their programs, continuously promoting them and making information about them highly accessible. According to DeVry University’s McCoy, “Reports have shown that, on average, only 2-5% of eligible employees use tuition assistance programs, and less than half of working adults are aware if their employer offers such a program.” Less than 10%. This indicates the need for employers to do a more effective and consistent job of communicating the availability, benefits, purpose and other aspects of the program.

Not only do employers need to do a better job of communicating the availability of tuition benefits, and the benefits and advantages for the employee, they need to be less restrictive in establishing program requirements. McCoy notes that all too often, employers leave two very important elements out of their approach to tuition benefits – empathy and trust. Tuition benefits policies must empathize with employees, to understand the economic and cultural factors they may be living with, and trust them to take on the challenges of education responsibly and enthusiastically while maintaining their regular job responsibilities.

The Aspen Institute calls continuous skills development for employees a critical business imperative, and says employers must enable, promote and reward upskilling or risk becoming obsolete. Aspen and the Institute for Corporate Productivity partnered in the creation of a model that identifies key elements of successful tuition assistance programs. This new approach details 7 essential components of a modernized program that helps employers meet the need for an agile workforce of continuous learners.

According to this model, effective tuition assistance programs are:

At DeVryWorks, we believe that while finding the right talent can be tough, investing in their growth shouldn’t be. We work with leaders and innovators in information technology and security, operations and supply chain, accounting and finance, and human resources to help them build skilled, productive and diverse workforces.

You envision a workforce that is continually learning, growing and helping your organization move forward. Our consultants can help transform your vision, and your skills development objectives, into actionable, hands-on learning programs.

What sets us apart? We have a proven record of aligning academic programs to solve talent gaps in growing companies. This is the very principle upon which DeVry University was founded in 1931.

Innovations like our Direct Bill Plan, which allows employers to pay DeVry University directly, ensure the employee can focus solely on their coursework and skills development. Direct Bill allows employers to offer a more inclusive tuition benefits program, without barriers or biases, that boosts diversity, equity, inclusion and belonging initiatives by providing employees from underrepresented communities with the resources they need to advance their careers. And when this benefit is coupled with DeVry University’s Completion Grant program, eligible students are often able to achieve a low-cost or no-cost education without taking on debt.