What Is Tuition Reimbursement and How Does It Work?

Tuition Reimbursement: What Employees Need to Know

As more organizations prioritize employee development, tuition reimbursement has become a common benefit for workers seeking to continue their education. Tuition reimbursement is an employer-sponsored program that helps cover qualified educational expenses—often tuition, fees, or required materials—while employees remain in the workforce. Many programs are designed to support skill development, career advancement, or job-related learning, though each employer sets its own guidelines.

Below is a breakdown of how tuition reimbursement typically works and what employees can expect when exploring this benefit.

How Tuition Reimbursement Works

Although every employer’s policy differs, most tuition reimbursement programs follow similar structures. Employees generally submit documentation—such as proof of enrollment, grades, or receipts—to receive reimbursement after completing approved coursework. Many employers require pre-approval to ensure the course or program aligns with internal guidelines. Educational assistance programs commonly support tuition, fees, books, and supplies, but non-essential expenses are typically excluded.^1,2

What Courses Are Eligible?

Eligibility varies widely. Some employers reimburse only job-related courses, while others support degree programs that strengthen broader professional skills. Employers may also set standards such as course relevance, accreditation requirements, or minimum grade thresholds. Because definitions of “work-related” can vary, employees should review their company’s written policy or consult their HR department for clarification.

When Reimbursement Is Issued

Some companies pay institutions directly, but most require employees to pay up front and then apply for reimbursement. Payments may be issued after course completion, after final grades are submitted, or on a scheduled basis such as quarterly or annually. Employers may set specific eligibility requirements within a written educational assistance plan, such as defining covered expenses, participation criteria, and annual benefit limits, in accordance with Section 127 of the Internal Revenue Code.²

Restrictions and Program Conditions

Employees should review their employer’s policy for potential limitations such as:

• Waiting‐period or tenure requirements
• Limits on the number of reimbursable credits per term
• Grade requirements for reimbursement
• Repayment obligations if an employee leaves the company before a specified date
• Approval steps required before enrolling

These conditions help employers ensure that tuition reimbursement supports both employee learning and organizational goals.

Is Tuition Reimbursement Taxable?

The IRS allows employees to exclude up to $5,250 per year of employer-provided educational assistance from taxable income when offered through a qualified program.¹ This applies to undergraduate and graduate coursework and can include tuition, fees, and required course materials. Any amount above the $5,250 threshold is typically reported as taxable income on the employee’s W-2.¹

Tuition reimbursement can be a valuable benefit for employees seeking additional education while working. Understanding how program requirements, reimbursement limits, and tax rules function can help employees plan effectively and make informed choices about their educational goals. Employees should consult their HR department to learn the specific details of their organization’s program before enrolling in courses.

Learn more about paying for college: Explore financial aid options at AIU.

¹ Internal Revenue Service. (2023). Employer-provided educational assistance programs can help pay for college. https://www.eitc.irs.gov/newsroom/employer-offered-educational-assistance-programs-can-help-pay-for-college (visited 12/2/2025).
² Internal Revenue Service. (2024). Frequently asked questions about educational assistance programs. https://www.eitc.irs.gov/newsroom/frequently-asked-questions-about-educational-assistance-programs (visited 12/19/2025).

AIU cannot guarantee employment, salary, or career advancement. REQ2180865 12/2025