Over the course of the past few years I debated whether or not to get an MBA.
After going back and forth for years I finally decided to get my MBA.
What ultimately convinced me to get my MBA? Three words: employer tuition reimbursement.
For those who are not familiar with employer tuition reimbursement, there is a tax law that allows employers to provide each employee up to $5,250 in employer tuition reimbursement tax-free each year. It’s just one of the many perks of being a full-time employee.
Now, not every employee offers employer tuition reimbursement. Policies on employer tuition reimbursement can even vary from department to department within the same company. One department may deny a request for reimbursement while another may approve it.
If you want to go to grad school but don’t want to take out $50 to $100 thousand of additional student loans (the average cost of a masters degree), it’s smart to look into employer tuition reimbursement.
Today I’ll discuss how to pursue the employer tuition reimbursement and how to take full advantage of it.
How to find out if you qualify for employer tuition reimbursement
The first step in taking advantage of the employer tuition reimbursement is, of course, to find out if your company offers an employer tuition reimbursement program. Larger companies are more likely to offer tuition reimbursement than smaller companies. Again, even if a company does offer a reimbursement program they still likely allow department heads to have the final say on whether they will offer the reimbursement or not.
Finding out if you qualify is as simple as checking your company’s intranet site and/or talking to human resources. Oftentimes all the information you need is available online.
There are typically a number of requirements that come with an employer tuition reimbursement including:
- Prior approval before enrolling in a class
Typically a form will need to be filled out and approved by someone in your department prior to enrolling in a class. Getting this form filled out and approved will make it much easier to get your reimbursement.
- The class or degree program must be related to your current job
Companies don’t want to pay for employees to take classes so they can switch their career; to the contrary they want employees to take classes and pursue an advanced degree so they can benefit the company both short-term and long-term. If you’re currently a finance professional and want to get a masters in counseling don’t expect your employer to subsidize your education.
- You must receive a “B” or higher
Most companies will not pay for a student to take a course that they ultimately do not pass. Many take it further by saying a student must receive a “B” letter grade or higher to get reimbursed.
- You must stay at the company
As I mentioned earlier, companies do not want to pay for an employee’s education simply so they can jump ship and leave the company. Some employers have a policy to safeguard against this: If you leave within two years of receiving tuition reimbursement you will need to pay back any reimbursements received within the past 24 months. They will take the funds out of your final paycheck and anything left over they will bill you for.
I have a friend who was denied tuition reimbursement by his employer for MBA classes while another friend at the same employer pursuing the same degree was granted tuition reimbursement. While it makes no logical sense why one was denied and the other was not, it’s important to keep in mind that employer tuition reimbursement is not guaranteed, even if they have a tuition reimbursement program.
If receiving tuition reimbursement is important to you it might make sense to move to another part of the company that you know will likely approve the tuition reimbursement. You may also have to leave for another employer if your employer does not offer a tuition reimbursement program.
How to take Full Advantage of Employer Tuition Reimbursement
Let’s say you have your tuition reimbursement in hand. How can you take full advantage of it? After all, $5,250 a year will not pay for your entire masters program, at least if you want to graduate in less than seven years.
There are a number of things you can do to fully utilize the tuition reimbursement program. They include the following:
- Timing is everything
When it comes to taking full advantage of the $5,250 per year reimbursement, timing is everything. The first thing you need to know is that classes taken in the Fall semester are typically reimbursed in the next calendar year. The reason for this is because most employers require final grades before reimbursing, as well as the fact that the final submission for reimbursement in a calendar year is typically early December.
There are a couple ways to use this to your advantage. First, some schools offer courses that start in September and end in October or November instead of December. If you start your masters program in the Fall you will want to make sure that you take a class that ends early. That way you can get reimbursement in the current year. Since you had no Spring classes, getting no reimbursement is similar to losing $5,250.
Next, make sure your last semester is in a Fall semester and make sure your class ends in mid or late December. This will allow you to carry forward that reimbursement into the next year, despite the fact that you will not actually take any classes the next year.
If you time everything right you can get six years worth of reimbursements, or $31.5k, while only taking four and a half years worth of classes.
- Start as soon as possible
The sooner you start a master’s program the better. This may seem like obvious advice, but it’s something that I personally didn’t think about as much as I should have. The process of applying for and completing a master’s program takes years.
Taking full advantage of the tuition reimbursement hinges on taking time when getting your master’s degree. Therefore, the sooner you start the better because the longer you wait the quicker you will want to get the program over with. For example, it’s much easier for a 25 year-old to take four and a half or five years to get their degree than a 30 year-old.
If you plan things properly you can get a huge benefit from taking full advantage of employer tuition reimbursement. The decision to get a master’s degree will be much easier if you know you will receive over $30,000 in help from your employer.
If you’re on the fence on whether to get a master’s degree or not, make sure you look into whether or not you qualify for your employer’s tuition reimbursement program. It just might help you make up your mind.
Were you aware that many employers have tuition reimbursement programs? Have you taken advantage of it or are you currently taking advantage of it?
____________
Photo by John Liu
Check out some of our favorite personal finance resources:
Are you getting the best credit card rewards? Check out the top cash back credit card offers (updated daily)
Make extra money: 15 ways to make money from your computer
Get the First Chapter Free!
Join our online community and get the first chapter of the book Student Loan Solution absolutely FREE!
Good for you for going back to get your MBA DC. Getting the reimbursement was a big part of my decision – though my employer didn’t have any requirement for me to stay afterwards and told me they had no plans of using it so I ended up leaving about 6 months after graduating. I went to a private school so it covered about 2/3 of my tuition. My wife got her Masters covered entirely which was awesome.
I think employer reimbursement programs are great ways to balance the cost of higher education. I have a client right now who is taking advantage of hers and it covers just about half of her program which is a huge relief. From my perspective, it’s “free money” from your employer just like your 401k and you should take advantage of it if it’s available.
FrugalRules Wow that’s a pretty good deal, John! Two masters and you only had to pay for 1/3 of one of them. It sounds like you got a great deal on the masters, especially considering you did not have to stay for a certain period of time following graduation.
blonde_finance I have to agree, Shannon. If your employer is willing to pay for a sizable portion of your masters, you might as well take advantage of the perk. It’s just one more of those benefits you need to voluntarily opt-into – and should!
I think it’s awesome that some employers are willing to invest in their employees like that! I would definitely take advantage if I were ever in that situation.
It really is a great benefit to have and I’d lean towards taking advantage of it too. I have a friend who’s employer offered a generous tuition reimbursement plan and that plus some scholarships covered most of her law school tuition. While most graduate with a large amount of debt, she came out with very little debt. I actively tried to find such a job when I went back to school but unfortunately couldn’t find one.
My school offered this to our teachers and several took advantage of it to get advanced degrees. I think it’s almost a no-brainer if you are looking to go back to school and if the strings attached to the money (like working for the company for x amount of years) aren’t too restrictive. It’s a win for the employer as well because they get a better trained and knowledgeable employee.
I had no idea that there were some companies that did tuition reimbursement. I knew of certain programs such as Peace Corps and teaching in foreign countries that did reimbursement, but not specific companies. It is an awesome benefit, and I would definitely be willing to stay at a company for 2 years to have them paid off.
I love employer tuition reimbursement plans as it really does make getting an MBA an an affordable option. And how often do we get to say higher education is affordable these days? :) Waiting to get your Masters until you’re working in a field where you know it can make a difference is also smart. They can be invaluable, but they also be an expensive paperweight if you don’t need it. When your company is helping foot the bill and you feel comfortable that it will help you gain promotions/increase earnings, then it can be a great investment.
It’s definitely a great perk. My workplace paid for me to complete my CFA a few years ago, which was a great incentive. I’m also glad I did it earlier rather than later – it’s not as time consuming as what you’ve described above, but those 3 years of study were tough! It’s hard to imagine going back and doing it now with a family and other commitments! Good on you for pursuing your MBA – good luck with completing it!
I feel like this is a rare benefit today and one of the first to go when a company has to tighten the purse strings. Definitely something to take advantage of if it’s available to you! Fortunately the military paid for my education through my Masters, but my current employer does have a small tuition reimbursement benefit available to employees. Every little bit counts!
If I could do it differently, I would have loved to go this route. I know my company sponsors some people way beyond the tax free limit.
Holly at ClubThrifty It’s nice to know that some companies are still willing to invest in their employees! I think it would be easy for employers NOT to invest in them through tuition reimbursement because honestly people move companies quite often today.
Andrew LivingRichCheaply I think law school would be a bit trickier, but if you can find an employer that is willing to invest that way by all means take advantage imo. I think it’s a lot more common with an MBA or as Brian referenced above, an advanced teaching degree.
Brian @ Luke1428 One thing I didn’t mention is that some employers won’t actually go after the money even if you switch companies right after getting your MBA. This might not be true with all companies, mind you, but the legal fees sometimes do not justify trying to recover the ~$10k that an employee received in tuition reimbursement (only goes back 24 months, not the entire time employed).
KerstinStokes I agree! Two years really isn’t that long of a time, either. It can go by incredibly quick (which is both good and bad depending on your situation). I would definitely seek out a company that offers tuition reimbursement if you are looking for an MBA.
ShannonRyan All great points, Shannon. I discussed with a friend for HOURS about the pros and cons of a full- and part-time MBA. Essentially both may be a waste of time in the end, but at least with a part-time MBA you can spread out the work, keep your job, and even get your employer to help out with the bills.
Jason@Islands of Investing Thanks Jason! I agree that it would be exponentially more difficult to do it when you have kids. I don’t know how people pull it off. I think getting my CPA and MBA over the next four and a half years will be an ideal time. I’ll be really happy when it’s over, though ;)
SimplySave That’s great that you were able to have the military pay through your masters (and thank you for your service!). I agree that every little bit counts. If you can spread your MBA over the course of 4 1/2 or 5 years you can potentially get in excess of $30k, which is a sizable amount if you ask me.
I think it’s ironic that teachers generally have to get a master’s yet no public school districts offer much in the way of tuition reimbursement. I would rather eat shoes than get another degree in anything, but if it were free, it might be hard to pass up.
Mark@BareBudgetGuy From what I’ve read on your site you were able to greatly leverage your full-time MBA, so I think you made the right choice. Granted results aren’t always a great gauge, so it’s important not to over-stress the ROI of any one situation.
Eyesonthedollar Haha I hear you. It will be tough being back in “class” and studying doesn’t come naturally anymore. I can work on the blog for hours a week in my spare time, but studying and going to class just doesn’t seem as productive.
I worked full-time at the university where I was getting my MA and received full tuition remission. You still have to pay tax on graduate courses, but, it was vastly cheaper than the sticker price of the degree. If you can swing getting a job at the college where you’re studying, it’s the best deal there is. And, I’m with you–any type of reimbursements for a degree are ideal!
DC @ Young Adult Money KerstinStokes True. Especially since we are young, 2 years isn’t that bad. If it goes incredibly quick though, I think it would be a good thing. It means you’re learning, working, and you don’t see the time passing by. Hopefully if that’s the case, they’ll keep you on for a long time because working for a place where I’m not constantly looking at the clock seems a good place to work.
Mrs. Frugalwoods That’s awesome that you were able to get your MA while working at the University! I know one of the admissions employees at the U of M is getting her MBA while working there and even recently accepted a job at a corporation in town. Saving any money is good!
KerstinStokes DC @ Young Adult Money Great point. It’s no fun working somewhere where you are constantly checking the time and waiting for 4 or 5 or whatever time is reasonable to leave.