This has to concern all of us

Parents Forum
101

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<p>This (#100) is utterly, utterly wrong. Myth piled upon myth.</p>

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<li><p>Only a tiny number of colleges grant full need-based financial aid, and the majority of us on CC seem to agree that few families with any real income can afford their need-based EFC unless they are really, really wealthy. Most need-based financial aid at most colleges is in the form of the very loans we are talking about.</p></li>
<li><p>Funded merit scholarships are like spit in the ocean compared to the aggregate cost of college education. Most merit scholarships are simply discounted tuition, and are effectively funded by other students borrowing to pay the sticker-price tuition. Only a handful of students get full tuition merit scholarships, and if the college financing system were effectively shut down competition for those slots would be as cutthroat as admission to Harvard is today. You would not be able to count on them, that’s for sure.</p></li>
<li><p>Borrowing to pay for community college is a huge part of the student loan market. And if loan availability is shut down a ginormous number of community colleges are going to have to close, because the taxpayers won’t be willing to fund them to keep them open when they can’t get tuition payments.</p></li>
<li><p>“Plenty of employers” paying for employees’ college education? Bizarre fantasy. Yes, there are some; it’s not the Tooth Fairy. It’s great if you are working for one of them. But for the other 99% of Americans, it’s not a practical option.</p></li>
<li><p>Athletic scholarships. Private sponsorships. Yeah, right.</p></li>
<li><p>College education not being a primary government function: Only in the United States. And even here, only recently. For most of the past 150 years or so it WAS regarded as a primary government function, which is why we have magnificent public university and community college systems, as well as, yes, a system of federal subsidies for college education (including, by the way, tax rules that enable those few private employer tuition sharing programs). In the rest of the world, college education is still regarded as a primary government function. Whether it should be or not is certainly debatable, but the fact the Glenn Beck or Rush Limbaugh says it isn’t doesn’t make that true.</p></li>
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<p>It chills my bones that people are willing to spout complete nonsense like this.</p>

102

<p>Are there thousands of college seats that go unfilled because students can’t afford to go? Maybe at the lowest tier u’s. Somehow 3,000+ colleges are able to fill their seats and stay in business. Whether this continues to be the case when the loan market tightens up remains to be seen.</p>

103

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<p>I wonder what you mean by really, really wealthy. One-third of
American own their homes free and clear. One-thid rent and one-third
have mortgages. The one-third that own their homes could probably take
out a loan on their homes to fund college.</p>

<p>I don’t consider us wealthy (we live in a modest place, drive a car
with 230,000 miles, sleep on the floor, etc.) and have an income far
less than half what the politicians consider rich these days but did
save enough for college. The kids chose cheap publics.</p>

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<p>Every litle bit helps. Those $1,000 merit scholarships here and there
are a big deal if the overall price tag is under $11K.</p>

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<p>I was pretty surprised at the number of small ($500 - $2,500) private
scholarships at my son’s school.</p>

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<p>Tax credits cover $2,500 in expenses for $4000 in tuition/fees/books.
In California, the tax credits should well more than cover community
college expenses. In expensive places like the Northeast, it should
cover most with the student kicking in $1,000 or $2,000. I suspect
that many community college students are rolling in living costs which
throws the tax credit funding mechanism out of whack.</p>

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<p>“The Benefits USA 2010/2011 survey results found 84.7 percent of
companies offer tuition reimbursement to their employees.”</p>

<p>“As far as the types of employees tuition reimbursement is made
available to, 38.2 percent are management employees. Companies
reimburse technical or professional and administrative employees at a
rate of 37.9 and 37.4 percent, respectively. About 33 percent of
hourly employees are offered tuition reimbursement, while 45.3 percent
of organizations make it available to all employees.”</p>

<p>[Tuition</a> Reimbursement Helps Companies Build a Stronger Workforce](<a href=“http://www.prweb.com/releases/2010/12/prweb4878364.htm]Tuition”>http://www.prweb.com/releases/2010/12/prweb4878364.htm)</p>

<p>This is an area of interest to me as I only paid for one year of
undergrad - the other three years and my grad school were covered by
employers.</p>

104

<p>“This (#100) is utterly, utterly wrong. Myth piled upon myth.”</p>

<p>-No myth, no internet search, no others or my own opinion. Every single point in my post is supported by my own family and many of friends. Did not use any other resources. I am a real person, I am not a myth.</p>

105

<p>That article on tuition reimbursement is interesting, but the survey it was promoting covered all of 4,500 employers with 6 million employees. I wasn’t able to find quickly how many employers have welfare benefit plans covered by ERISA, but the number of pension plans (which should be smaller than the number of welfare plans) was about 700,000 as of five years ago – and that doesn’t include any governmental or church employers, or very small businesses. There was no claim that the survey sample was representative of all private employers with benefit plans, much less of all employers. I found a 2006 survey that says that it isn’t possible to determine how many people receive employer tuition reimbursement, but that data from the mid-90s suggests that back then it was about one-quarter of all people who were taking undergraduate classes but reported they were employees primarily, not students. The 2006 calculation of the overall tax expenditure to the government from allowing tax-free employer tuition assistance is about $580 million. That pretty much pales next to the $7 billion the government kicks in via tuition tax credits and deductions.</p>

<p>Second, while 85% of the employers surveyed offered tuition reimbursement to someone, only 45% offered it to all types of employees (i.e., management and non-management). I don’t think this is a question of companies only offering it to management employees; I think in lots of cases it’s a union-contract benefit and may only be offered to hourly workers. And only a quarter of the companies that offered tuition reimbursement offered it without caps. The average cap for the others was $3,700-$4,000/year. Granted, that would be enough to cover half-time tuition at third-tier state colleges and community colleges here.</p>

<p>The article also didn’t address what portion of tuition was reimbursed. I’ve never worked for a company with tuition reimbursement, but one of my kids now works for a company with extremely good benefits. They reimburse tuition without limits, but usually at a 50% rate. (They also don’t hire non-college-graduates, so it wouldn’t be a very good place to look for help in getting a bachelor’s degree.) I do know lots of large employers cover graduate programs related to what they do.</p>

<p>If I’m not mistaken, these employer benefits also substitute for the tax credits; you can’t get both benefits.</p>

106

<p>I’m wondering whether these tuition reimbursements are taxed as income.</p>

107

<p>Companies that say that they don’t hire people without college degrees often do - you just have to have a way in that gets around HR. That’s a lot harder today than it was back in the 80s and 90s but it still does happen.</p>

<p>I had one major employer pay for my college expenses and they covered tuition, fees, and books. I believe that I could have put travel expenses on an expense report but it wouldn’t have been worth it to me to do the paperwork. This was back in the 80s and 90s when college costs were much lower than they are today.</p>

<p>I do know a guy that got an entire MBA paid for where I work at Babson (school was in Wellesley I think). He was a software engineer here and the degree was completely unrelated to his work.</p>

<p>You originally stated that tuition reimbursement is available to 1% of workers. While the exact number is hard to determine, I think that it would be far higher than your number.</p>

108

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<p>They weren’t when I got my degrees.</p>

<p>Congress had to renew something every year or two so that they weren’t taxable. I don’t know how things are today but work-required stuff is deductible, even if your employer doesn’t reimburse.</p>

<p>I know that our school district provides tuition reimbursement for teachers and I’d assume that it’s a common benefit for teachers - there are a lot of public school teachers out there.</p>

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<p>The same here, “They weren’t when I got my degrees.” I got 2 - BS, MBA, various employers, My H’s MBA was also covered by his employer (very small company). In addtion, neither of us needed any of these degrees to perform in our positions, both of us got them because “why not if they are free”. Later, I realize how right I was getting my MBA, it has helped me to find a next job several times, HR and managers were impressed by me getting an MBA while working full time and raising family.</p>

110

<p>My DH has sponsored a number of his staff on getting their graduate degrees funded by his company. None at the undergrad level though.</p>

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<p>^Very good! Kudos to your H.</p>

112

<p>Yes, that’s true about teachers. And how many public school teachers get hired without bachelor’s degrees? (Hint: The answer is supposed to be 0.) And I am not wrong about my daughter’s company. She is pretty much the most junior person there, and she had an M.A. before being hired. They don’t hire clerical/administrative staff; except for a manager or two, those functions are outsourced.</p>

<p>I know I spoke (wrote) too quickly when I said only 1% of employees are eligible for tuition reimbursement, precisely because lots of union contracts provide for that benefit, and because lots of employers subsidize post-baccalaureate education, especially if it relates to employment. I know several people who worked for Big Three auto manufacturers who went to college on the company dime (some of whom got their degrees at General Motors Institute, or something similar Chrysler had).</p>

<p>On the other hand, the tax expenditure calculation for tuition-reimbursement programs suggests that the gross amount of tuition reimbursement in 2006 was somewhere in the $2.5-$3 billion range. That’s not chicken feed, but it’s a whole lot less than annual new student debt as a source of funds for money coming in to the higher education system (not that I can find that number, either, but a conservative guess is around $40 billion), and it isn’t infinitely expandable, to say the least. I can’t guess how much of that went for undergraduate tuition, but I’m sure it’s a lot less than 100%.</p>

<p>Suggesting that student loans can be replaced by employer tuition reimbursement or merit scholarships is a version of Marie Antoinette’s purported response to hearing that the poor were rioting because they couldn’t afford bread: “Let them eat cake.” There isn’t anywhere near enough of this cake in the world to match people’s need for tuition financing. And the government subsidy of tuition reimbursement is net probably at about the same percentage level as its subsidy of subsidized student loans, so it isn’t a question of taxpayer bailout vs. private initiative, either. The taxpayers are in there both ways.</p>

<p>Tuition reimbursement is a fringe benefit that is nontaxable to the employee and deductible to the employer (i.e., therefore subsidized by taxpayers to the extent of the employee’s tax rate) if the plan under which it is provided meets certain basic requirements. The current provision dates from 2001, and it is part of the “Bush tax cuts” that keeps getting renewed for short periods of time. However, I believe that tuition reimbursement has mostly not been taxed to employees – until relatively recently, fringe benefit tax rules were very loose.</p>

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<p>UPS has job postings at my daughter’s school - they are looking for packaging people and they conspicuously point out their tuition reimbursement program.</p>

<p>I visited the Toyota plant near Lexington, KY where my vehicle was built and they provide tuition reimbursement too. I would guess that most workers there don’t have college degrees so that is an opportunity for them to get their associates or bachelors degrees. That Toyota plant wasn’t a union plant.</p>

<p>Costs for part-time education tend to be a lot lower than full-time day programs as they don’t have to cover living expenses, food, athletic facilities, and all of the extras that full-time students get that part-time students don’t get. The part-time stuff can be viewed as more of a profit center as the courses just make further use of sunk costs.</p>

<p>BTW, I think that tuition reimbursement is a better use of public funds. The company that paid my costs required a C for reimbursement for undergrad courses and a B for graduate courses. All parties involved have skin in the game and, I would guess that those already employed may have more motivation or better time-management than students that have the funding taken care of them than others.</p>

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<p>Tuition reimbursement is taxable if you can answer yes to the following 2 questions:</p>

<p>Is the education needed to meet the minimum educational requirements of
your business? </p>

<p>Is the education part of a study program that can qualify for a new trade or<br>
business?</p>

<p>and if you can answer no to this question</p>

<p>Does the education maintain or improve skills required in doing your present
work? </p>

<p>Reimbursements over $5250 per year are taxable.</p>

<p>What some companies now do is implement a service requirement dependent on the level of degree that they reimburse in order to keep employees from leaving right after they complete the degree. I worked for a company where you had to give 2 years of service for reimbursement at the bachelors level or below and 3 years for reimbursement at the graduate level and 5 years at the PhD level.This always ends up being a sliding timeline, especially if one is attending school part time.</p>

<p>Right now tuition reimbursement seems to be a vicious circle because at many places you cannot get hired without the degree.</p>

<p>While a graduate degree is a requirement to keep employment, most teachers are not reimbursed for graduate programs. There may be teachers whose masters are funded through the Fellows program, or part of a hiring package for shortage areas, but most teachers are not reimbursed for grad degrees.</p>

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<p>BCEagle, UPS is very much a unionized employer, and Toyota exists in a highly unionized industry. I believe their benefits would reflect union contracts, even at facilities and for positions that may not be unionized.</p>

<p>Take a step back for a minute. In a world where the unemployment rate among recent college graduates is something like 25%, and higher than that among young non-college graduates, do you really think it’s a meaningful alternative to student debt to tell people “Go to work for UPS or an automaker and they will subsidize your undergraduate education?”</p>

<p>By the way, I don’t believe I have all the answers myself. The current system has lots of problems. But the rabid enthusiasm here for simple slogans like “more personal responsibility” and “no taxpayer funding” is very hard to take, especially when they are essentially talking about dismantling the American system of higher education and excluding huge numbers of kids from access to what’s left.</p>

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<p>sybbie: You have the taxability of tuition reimbursement slightly wrong. Tuition reimbursement as part of a qualified plan, up to $5,250, is not taxable at all. Tuition reimbursement over that level is taxable unless it satisfies the test for a working condition fringe benefit, which is the test you cite (i.e., that the course is a requirement to keep your current job or to improve your skills in your current job, but not a way to qualify for a different line of work).</p>

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<p>I didn’t say that they weren’t. As a previous investor, I do know that
they are unionized.</p>

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<p>What percentage of US autoworkers are unionized?</p>

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<p>The company representatives went over the benefits package with us
when we went for the factory tour (it’s quite a long tour). The
benefits are on par with what we had in my previous company. The
salaries that the Toyota workers made, though, were lower than what
those in the unionized shops made.</p>

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<p>I was at a McDonalds near my son’s school a few years ago and they had
a banner indicating that they were looking for management trainees.
The pay was $35K with benefits including tuition reimbursement. I would
certainly look at that option to pay for college. There are many that
look into the military services to help pay for college too. That’s
gotten a lot harder as more have shown interest in that avenue.</p>

<p>One of the guys that I played tennis with at a private court has a
small drywall business. He starts at 5:00 AM and is sometimes done by
noon. He normally has several employees but his company expands and
contracts with the amount of business that he gets. He also strings
tennis racquets on the side. He has a new truck, just got back from
a trip visiting his son and owns his own home. He seems to be doing
fairly well. And he doesn’t have a college degree.</p>

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<p>I do think that there should be more personal responsibility but that
a good chunk of our country doesn’t understand what that means. I’m not
in the camp that says that there should be no taxpayer funding. Gaining
more education to increase your income increases taxes so putting in
tuition tax credits and/or deductions makes sense - as long as there’s
someone watching to see if the courses make sense.</p>