Why Almost Nobody Uses Their Tuition Benefit

Published August 14, 2026

Because of how it is built, not because employees do not want it.

Around 80% of working adults say they are interested in continuing their education. Roughly 2% actually use their employer's tuition program. That is not an interest problem — it is a design problem, and it is fixable.

Here is what the research shows, what causes the gap, and what to do about it.

The gap, in numbers

U.S. employers spend roughly $28 billion a year on tuition assistance, according to figures attributed to the Georgetown University Center on Education and the Workforce. About 47% of companies offered tuition reimbursement as of 2020, per SHRM.

And then the participation figures land:

What the research finds	Source
~80% of working adults are interested in continuing their education	InStride
Only ~40% know their employer offers a tuition benefit	InStride
~25% of interested employees start an application	InStride / Bain
~2% actually participate	InStride
Fewer than 5% take advantage	Harvard Business Review
87% of employers reimburse only after coursework ends	IFEBP

A note on these numbers: participation estimates range from about 1% to just under 5% depending on who is counting and how, and several of the most-quoted figures come from companies that sell education benefits. The exact number is arguable. The magnitude is not — every source, independent or otherwise, lands in the low single digits.

So what is actually going wrong?

Four things, and they compound.

1. Half your employees do not know it exists

If only about 40% of employees know the benefit is there, more than half of your spend is invisible before anything else goes wrong. The U.S. Chamber of Commerce Foundation has identified awareness as a primary challenge with these programs — it gets announced at onboarding, appears in a handbook nobody reopens, and then never comes up again.

2. Reimbursement means the employee funds it first

This is the big one, and it is structural.

The word reimbursement describes the whole problem. The employee enrolls, pays tuition out of their own pocket, completes the term, submits documentation, and waits to be paid back — with 87% of employers reimbursing only after coursework concludes.

So a benefit designed to help people who could not otherwise afford education requires them to afford it first. For an hourly employee, fronting $1,500 and waiting three months is not a benefit. It is a loan they cannot take.

3. The process is genuinely hard

Harvard Business Review has described these programs as "Byzantine and lengthy," and the drop-off data bears it out: of the employees interested enough to look, only about a quarter start an application, and a fraction of those finish.

Pre-approval forms. Accredited-institution requirements. Grade minimums. Documentation. Deadlines that do not line up with academic calendars. Every step is defensible on its own and the cumulative effect is a funnel that leaks at every stage.

4. Nobody helps them through it

Survey work from the Chamber Foundation found that a large share of organizations provide no additional support alongside the benefit — no guidance choosing a program, no help with the application, no check-in once someone enrolls. The benefit is offered, and the employee is on their own.

Why this is worth fixing

Because the evidence that education benefits work is actually quite good — when people use them.

A systematic review published in Healthcare examined 27 studies on continuing professional development and found employee development opportunities consistently associated with increased retention and reduced turnover. Notably, job satisfaction and organizational commitment fully mediated that relationship: education benefits retain people by making them more satisfied and more committed, not through a contractual obligation to stay.

The National Bureau of Economic Research has also examined the retention effects of tuition reimbursement. And Harvard Business Review has reported employer-education partnerships where participating organizations saw meaningfully higher retention and revenue growth.

Employers already believe this. Chamber Foundation survey work found around 90% of business leaders recognize the strategic value of tuition assistance, and roughly 85% believe the positive outcomes outweigh the costs.

So the belief is there. The budget is there — $28 billion of it. The employee interest is there at 80%. The only thing missing is use.

The quiet cost of a benefit nobody uses

There is a second cost most employers never calculate.

Under Section 127, an employer can provide up to $5,250 per employee per calendar year in educational assistance excluded from the employee's wages. That exclusion also keeps the amount outside the employer's payroll tax base.

But it is per employee, per calendar year, and it does not carry over. Whatever is not used by December 31 is gone — no rollover, no grace period, no accumulation into next year.

So a program with 2% participation is not just an underused perk. It is an annual allowance the tax code hands you, most of which expires unclaimed every December.

Curious what your own utilization looks like? If you already run a tuition program, ask your provider for participation as a percentage of eligible employees — not the number of participants. The two tell very different stories.

What to do instead

You do not have to abandon tuition reimbursement. Plenty of employees pursuing degrees genuinely need it, and Section 127 covers tuition, student loan repayment, and employer-provided instruction alike.

But if participation is the problem, the fix is to remove the four barriers above rather than to promote harder. Four design principles:

Remove the float. If the employee has to pay first, most of your workforce is excluded regardless of what the policy says. Direct provision or direct billing changes who can participate.

Remove the application. Every approval step is a place people drop out. If eligibility can be automatic, make it automatic.

Shorten the unit. A degree is a multi-year commitment. A course someone can finish on a lunch break is a decision they can make today. Short units produce completions; completions produce momentum.

Go broader than degrees. Section 127 does not require education to be job-related. Personal finance, communication, wellbeing — all of it qualifies. The employee dealing with debt stress is not going to enroll in a master's program, but they will absolutely take a 25-minute course on paying it down.

That is the whole design brief: remove the money barrier, remove the paperwork, shrink the commitment, and widen what counts.

Where AvelWell fits

AvelWell is built around those four principles.

Employees get 180 courses across 60 interactive tools — financial acumen, career development, and personal wellbeing — at no cost to them. There is nothing to front and nothing to reimburse. No enrollment form, no application, no approval step, no waiting period. Every eligible W-2 employee has access from day one.

Courses are built to be completed, not endured. And because the catalog goes well beyond job training, the benefit is relevant to the whole workforce rather than the small slice considering a degree.

On the employer side, completed education is educational assistance excluded from wages — which lowers your payroll tax base as engagement rises. It is the rare benefit that can cost less the more it gets used.

We are not going to quote you a participation rate. We are early, and any provider quoting you a number should be asked how it was measured and over what period. What we will say is that the barriers listed above are the ones we designed the product to remove, and that participation is the right question to keep asking — of us and of anyone else.

What we do not claim

This is not IRS-approved. The IRS does not pre-approve arrangements like this, and no provider can honestly say otherwise. It is not a safe harbor, and it is not a guarantee that any position prevails if examined. The employer remains the responsible taxpayer for adopting and operating a compliant plan.

We commissioned a written opinion from an independent tax attorney with more than fifteen years in employee benefits and federal tax. On our valuation methodology she concluded the position is more likely supportable than not, while being candid that it is defensible but novel and that its strength depends on the quality of an employer's factual substantiation. That complete opinion goes to your CPA or tax counsel for independent review — the entire document, not a summary.

Want to see what removing those barriers looks like? Take a look at avelwell.com, or book fifteen minutes and we will walk through your current program's participation together — including whether changing anything is worth it for your workforce.

Frequently asked questions

What percentage of employees use tuition reimbursement? Estimates range from about 1% to just under 5% depending on the source and methodology. Harvard Business Review has reported fewer than 5%; figures around 2% are widely cited. All credible estimates land in the low single digits.

Why is tuition reimbursement participation so low? Four compounding reasons: many employees do not know the benefit exists, reimbursement requires paying out of pocket first, the approval process is long and complex, and most employers offer no support navigating it.

How much do employers spend on tuition assistance? Roughly $28 billion a year in the U.S., according to figures attributed to the Georgetown University Center on Education and the Workforce.

Does unused Section 127 educational assistance carry over to next year? No. The limit is per employee per calendar year and resets January 1. Unused amounts do not carry forward.

Does education have to be job-related to qualify under Section 127? No. Section 127 does not require job relatedness, though courses involving sports, games, or hobbies are excluded.

Can an employer offer both tuition reimbursement and a platform-based education benefit? Yes. Both are forms of Section 127 educational assistance and both count toward the same $5,250 annual limit per employee.

Educational overview — not tax or legal advice. Section 127 treatment depends on plan design, employee eligibility, and applicable limits. Statistics are attributed to their published sources and methodologies vary. Confirm specifics with a qualified tax professional. AvelWell is a technology platform operated by 2ones LLC.

Sources

Verified for post 2 by reading the statute directly: 26 U.S.C. § 125 subsection (f)(1) defines a qualified benefit as one excluded from gross income by an express provision of the chapter other than sections 106(b), 117, 127, or 132 — which is why educational assistance cannot sit inside a cafeteria plan. Also useful: IRS Training 4213-018, Lesson 4 — Introduction to Cafeteria Plans.

See what Section 127 could save your team — run the two-minute Fit Check