Tuition Reimbursement Has Been a Popular Corporate Perk for Decades. But Does It Work?

The 1970s brought us Tab soda, shag carpeting, 8-track tapes, and a new corporate benefit called tuition reimbursement. But 50 years later, our tastes have changed, technology has advanced, and the cost of education has outpaced wage growth. It’s time for a new model that addresses the workforce skills gap while creating pathways to prosperity for individuals who have historically sat on the sidelines of education.  

Tuition Reimbursement: A Bulky Model

The Revenue Act of 1978 appeared to be a win for companies and employees. The new IRS code allowed employees to receive up to $5,250 tax-free for qualified educational costs. And companies could market a benefit that reduced turnover, increased productivity, and attracted talent.  

But on average, only 2% of employees use tuition reimbursement. The process is cumbersome and requires employees to pay tuition and other fees upfront out of their own pocket. Once the employee has completed the coursework, they submit for reimbursement by showing proof of completion and the grade received. Depending on the company’s policy, they will reimburse the employee for all or some of the cost.   

While tuition varies greatly across programs, providers, and in-state/out-of-state status, the average in-state tuition at public 2-year colleges is $3,598, and 4-year in-state tuition is $9,750. For many frontline employees balancing rent, childcare, and existing student loans, having to pay the upfront cost of tuition makes education feel out of reach. 

Once an employee completes the class and submits for reimbursement, they wait in the administrative paperwork pipeline, which often takes weeks or months. Rarely is reimbursement received in time to pay for the next class registration. If the employee wants to pursue continuous academic progress, they must pay out of pocket again, which doubles the financial burden. Or they take time off from school to wait for their reimbursement funds before taking another class. This bulky process and wait for reimbursement creates unnecessary stress for an employee already juggling work, family, and school.

From the company’s perspective, when the employee takes longer to complete their program or drops out entirely, they lose access to the new knowledge and skills. Tuition reimbursement doesn’t always provide a timely return on the company’s investment.  

Tuition Assistance: Flipping the Burden of Cost

Recognizing that requiring employees to pay for tuition upfront is a barrier, some employers have broadened their education benefits to include tuition assistance. 

Under a tuition-assistance, or direct-pay, model, the company pays the employee’s tuition directly to the school, eliminating the cost barrier. Employees don’t have to worry about fronting the cost of tuition at the beginning of each term. 

This allows the employee to maintain timely progress toward their certification or degree and increases motivation. The company realizes a quicker return on its investment when employees don’t have to skip terms due to funding gaps, and employees are more likely to use a tuition assistance benefit. For companies offering tuition assistance, the utilization rates are often 50% higher compared to companies offering only tuition reimbursement. 

While tuition assistance is an improved benefit over tuition reimbursement due to the removal of a financial barrier, it doesn’t always address the core staffing needs of the business. In healthcare, filling critical roles is the key to patient safety and quality of care. Tuition assistance generally doesn’t solve for a career mobility path customized to fill the current or predicted role gaps in the health care system.

A New Model is Born

The advantages of an internal career mobility program, achieved through benefits like tuition assistance, are far-reaching. Companies see reduced turnover, cost savings, and improved employee engagement and loyalty. Employees develop in their careers and enhance their economic and social mobility. The Josh Bersin Company found that creating opportunities for career growth was the most impactful practice for enhancing business, talent, and innovation outcomes. 

With financial pressures and a constant need to ensure every dollar has a measurable return, some healthcare systems navigating tight margins are understandably hesitant to fully embrace tuition assistance. That’s where outcome-aligned models like Stepful’s can help.  

Stepful takes a different approach to healthcare education. We partner with companies to create employer-embedded education, co-designing programs that align with each employer’s staffing strategy and workflows. Aligning training to a health system’s care model, documentation, device workflows, and tech-augmented care allows graduates to reach productivity faster.  

Stepful also offers the graduate guarantee, where companies only invest in employees who complete their program and graduate. Companies pay for graduations, not enrollments. If a company sponsors 10 medical assistants through an upskill pathway, and a student drops out or leaves the organization, Stepful will backfill the seat and ensure the employer gets 10 certified graduates. 

We believe in sharing accountability for outcomes—filling vacancies, advancing staff, and improving retention. Companies that sponsor students in Stepful programs see a 90% completion rate, twice that of alternative programs. And sponsored Stepful students have a 94% pass rate on the NHA Medical Assistant certification exam, compared to the national average of 81%. 

Our hybrid learning programs also prioritize flexibility and a faster path to career advancement, two of the top motivators of Stepful students. When companies pay the tuition upfront, and we provide a flexible learning environment, we eliminate the top two barriers to entry: time and money. 

Pathways to Prosperity for Employees and Proven Results for Employers

The data shows that tuition reimbursement is a model that may have worked in the past, but not anymore. It doesn’t guarantee outcomes for the employee or the company due to administrative and financial barriers. Tuition assistance is a step in the right direction by lifting the upfront financial burden that plagues tuition reimbursement. 

But there’s an even better model. 

One that empowers healthcare organizations to develop their own talent supply through employer-embedded education, thoughtfully co-designed with Stepful. One that prioritizes our learners’ journeys as they grow their careers. One that guarantees positive outcomes for all involved. Together, with our partners, we’re leaving the 1970s behind and stepping boldly into a new era of workforce transformation. 

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