Earning a college degree is one sure-fire way to increase your salary and future earning power, but did you know many companies will help you pay for it? Tuition aid is an employer-paid benefit that generates some of the greatest long-term financial gains, yet many employees don't take advantage of—or even know about—this incredible perk.
If you've been considering pursuing a degree, microcredentialing, or just taking some courses to sharpen your skills, read on to learn about the financial support your company may offer.
Tuition assistance began in the 1950s to provide educational benefits to people on active military duty. Since that time, tuition aid has become a regular part of affording college for many, and employers are stepping up ever more to offer tuition aid.
In fact, approximately 71 percent of U.S. employers offer tuition aid, according to Forbes, and those employers spend approximately $22 billion per year on college and university tuition. Unfortunately, only 5 percent of eligible employees participate in this type of benefit program.
According to the IRS, employers can pay up to $5,250 of an employee's educational expenses each year, which is tax-free for both the employee and employer. This includes tuition, fees, books, and some supplies and equipment. While some employers may offer a greater benefit, it's important to know that any amount over $5,250 will have to be reported as income and can affect your taxes.
Companies differ in the benefits they offer. Some employers only pay for courses that are directly related to an employee's current job, and others require employees earn above a B grade for reimbursement. Most programs require employees to pay for courses up front and offer reimbursement upon successful completion of the course.
Talk to your employer to learn more about your company's benefits. If you're not sure if your employer offers education benefits, The Balance Careers offers a list of some of the country's biggest employers who do.
The main reason to consider earning a degree, especially if your employer is offering assistance, is an increase in wages.
For example, Cigna reported 5.8 percent of its employees participated in the company's tuition reimbursement program between 2012 and 2014, according to HR Magazine; and those employees subsequently received on average a 43 percent incremental wage increase over a three-year period. Adults with a bachelor's degree earn 66 percent more on average than those with a high school diploma, according to Northeastern University. This equates to about $1 million in additional earnings in a lifetime.
While earning most any degree equates to a higher salary, one of the largest salary jumps occurs between those holding a high school diploma and a bachelor's degree, according to the U.S. Bureau of Labor Statistics (BLS). In 2019, the median salary of someone with a high school diploma was $38,792, while the median salary of someone with a bachelor's degree was $64,896—a difference of more than $26,000.
Aside from drawing better salaries, adults with bachelor's degrees also typically have lower rates of unemployment—2.2 percent versus 5.7 percent—and are more likely to receive employer-paid retirement benefits and employer-paid health insurance, according to Forbes.
When the economic future seems uncertain, having a college degree is one of the best ways to safeguard your career. During the COVID-19 pandemic, for example, the unemployment rate for workers with only a high school diploma was 17.6 percent, while unemployment for workers with a college degree was much lower at 8.4 percent, according to the BLS.
College graduates also gain more in-demand and transferrable skills, which can help them get promoted or change careers in the future. Graduates also have significantly more opportunities to network through their college contacts or alumni associations, where they may learn of new job opportunities before they are even advertised.
The benefits of earning a college degree are undeniable, and receiving tuition aid from your employer is a benefit you can't pass up.