January is Financial Wellness Month, a time to reflect on the financial decisions that shape not just our present, but our future. And for many families, few decisions carry more long-term financial weight than how to pay for college.
The rising cost of higher education has become one of the most significant threats to multi-generational financial wellness. The average total cost for a student to attend an in-state university is now approximately $27,146 per year, with tuition continuing to increase by roughly 4% annually. For students living on campus at a private institution, the annual cost increases to nearly $58,628, a figure that rivals the price of a small home.¹
These aren't just abstract numbers. They represent real financial pressure that ripples across generations. Parents delay retirement to help pay tuition. Young graduates enter the workforce burdened by debt that postpones homeownership, marriage, and their own retirement savings. Grandparents dip into nest eggs meant to sustain them through their later years.
But if you work in higher education (or are considering it), there may be a path toward greater financial wellness for your family. Many colleges and universities offer substantial tuition benefits to employees and their dependents. In fact, roughly 90% of U.S. universities provide some form of a tuition assistance program for employees and their families.²
While the financial incentives and benefits differ from school to school, understanding how these programs work and how they fit into your broader financial plan can make a meaningful difference, not just in what you pay for college, but in your family's long-term financial health across generations
What Benefits do Higher Education Employees Receive?
Most colleges and universities offer some combination of tuition waivers, discounts, or exchange programs for employees and their family members. The structure of these benefits varies widely, particularly between state schools and private institutions.
At many higher education institutions, full-time employees can take classes at no cost, while their dependents become eligible for tuition discounts. Children of employees may need to meet qualifying criteria, such as age caps, high school GPA requirements, and residency or enrollment requirements.
Some states also participate in tuition exchange or reciprocity programs, allowing employees or their dependents to use tuition credits at other participating institutions. For example, the children or dependents of University of Maine employees may participate in the New England Land Grant Reciprocal Dependent Tuition Agreement, which allows them to attend the University of Rhode Island and the University of Connecticut at in-state tuition rates.
Many private universities offer their own version of tuition assistance, with eligibility typically tied to an employee’s years of service. Often, the longer an employee has worked at the university, the greater the discount for their eligible family members.
University of Maine Benefits
Full-time employees of the University of Maine are eligible for a tuition waiver. Generally, you may take up to two tuition-free courses per semester or summer session, not exceeding eight credit hours annually. Tuition waivers can be used for undergraduate or graduate courses.
Part-time employees can take one tuition-free course per semester or summer session, up to four credit hours per year.
Here’s the good news for UMaine employees with college-bound kids:
Spouses, domestic partners, and dependent children of full-time employees are eligible for a 65% tuition waiver, while those of part-time employees are eligible for a 25% tuition waiver.
When you consider that tuition alone can exceed $12,700 per year for in-state undergraduates, these discounts translate to thousands of dollars in annual savings—especially for families with multiple children planning to attend college in the coming years.3
Are There Tax Implications to Receiving Education Benefits from Your Employer?
Yes, the IRS allows employees to receive up to $5,250 annually in tax-free educational assistance.4 Any amount exceeding this annual cap may be subject to ordinary income tax.
Calculating the True Cost of College for Your Kids
Even with tuition benefits, families should still take a strategic approach to calculating the actual cost of college. When helping your child weigh their options from a cost perspective, a key distinction lies between the total cost (sticker price) and the net cost (what you actually pay after considering discounts, scholarships, and tax implications).
For example, if your child qualifies for a partial tuition waiver through your higher education employer, that discount may outweigh merit aid from another school, but not always. It’s worth running a side-by-side analysis comparing your in-state tuition benefit with merit or need-based aid offered elsewhere.
Factors like room and board, travel, and program-specific fees can also shift the financial equation. Sometimes, “leaving money on the table” at your home institution can be a hard pill to swallow. However, it might make sense if a slightly more expensive program elsewhere better supports your child’s intended career path or offers attractive scholarship opportunities.
Planning Ahead: Saving for Children or Grandchildren
Whether you're a parent preparing for your own children's college years or a grandparent hoping to contribute to your grandchildren's education, starting early can make a significant difference.
Even if you or your family members qualify for substantial tuition discounts through an employer, paying for overlapping college years can put a strain on cash flow. And for grandparents, helping multiple grandchildren can quickly add up.
Depending on how much time you have to prepare, consider opening an education-specific savings account, such as a 529 plan. While contributions to a 529 plan don’t offer federal tax breaks for parents (or grandparents), many states allow contributions to be deducted at the state level. As long as the funds are used on qualifying educational expenses, withdrawals will be tax-free for your child, opening the door for potential tax-free earnings and growth within the account.
The Grandparent Advantage: Strategic 529 Planning
If you're a grandparent looking to help fund your grandchildren's education, there's a significant financial aid advantage to be aware of: grandparent-owned 529 plans are not counted as assets when calculating financial aid eligibility under the FAFSA (Free Application for Federal Student Aid).
This is a meaningful distinction. Parent-owned assets, including 529 plans, are factored into the Expected Family Contribution (EFC) calculation, which can reduce the amount of need-based aid a student receives. However, 529 plans owned by grandparents are excluded from this calculation entirely, potentially preserving your grandchild's eligibility for more generous financial aid packages.
If you're considering contributing to your grandchild's education, opening a grandparent-owned 529 plan can be a tax-efficient strategy that doesn't inadvertently compromise their aid eligibility. Just keep in mind that distributions from grandparent-owned 529s may be counted as student income in subsequent years, so timing withdrawals strategically (such as in the final years of college) can maximize this benefit.
Preparing to Pay for College? We’re Here to Help
Whether you're preparing to cover college costs for your own children, helping grandchildren pursue their education, or weighing the benefits of working in higher education, a financial advisor can help you create a strategy that leverages available benefits and tax-advantaged savings tools.
Reach out to our team to schedule time to discuss college planning strategies. We’re here to help you navigate education funding, and how it fits into your broader plan!
Sources:
1https://educationdata.org/average-cost-of-college
2https://www.cnbc.com/2024/03/06/a-job-more-parents-are-taking-to-get-a-discount-on-their-kids-college.html
3https://umaine.edu/sfs/costs/
