Employment-Based Student Aid

by Mark Kantrowitz, Publisher of FinAid.org and FastWeb.com
Employment-Based Student Aid

There are two main forms of employment-based student aid, work-study and employer tuition assistance.

Federal work-study is based on financial need. It provides you the student with a part-time job, typically involving 10 to 15 hours of work per week.

The earnings are not subject to FICA but are subject to federal income tax. These earnings also do not have an impact on your eligibility for need-based financial aid, as the FAFSA subtracts federal work-study earnings from adjusted gross income when calculating the expected family contribution. While a full-time job may hurt graduation rates because it takes time away from school, a part-time job can improve academic performance by forcing you to learn time management skills.

Employer tuition assistance is money provided by an employer to help employees and their dependents pay for college. Up to $5,250 of employer tuition assistance for undergraduate and graduate education can be excluded from income. The benefits must have been paid for tuition, fees, books, supplies, and equipment. Travel, lodging and meals are not included. Courses involving sports, games or hobbies are not included, unless they are required as part of a degree program or are related to the business of your employer. (Payments above $5,250 may also be tax-free if they represent a working condition fringe benefit. This means that if you had paid for the expenses, you would have been able to deduct them as an employee business expense.)

Employers often require employees to attain a particular grade or to complete a program in order to obtain reimbursement. The employer may also require the employee to continue working for the employer for a period of time after completing the course of study. Often this involves one year of employment after graduation for each year of support.

About half of all employers offer employer tuition assistance to full-time employees and about a quarter to part-time employees. Larger companies are more likely to offer employer tuition assistance. College employees and professional and technical employees are more likely to be offered employer tuition assistance as a benefit. Less than 10% of undergraduate students and about 20% of graduate students receive employer tuition assistance each year. However, employer tuition assistance is much more common among MBA students, with about 40% of MBA students receiving employer tuition assistance.

Mark Kantrowitz is an expert on paying for college. He is publisher of FinAid.org and Fastweb.com, the leading free web sites for information about student financial aid, student loans and scholarships.

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