FAR 31.205-44—Training and education costs.
Plain-English Summary
FAR 31.205-44 addresses when contractor costs for employee training and education are allowable as indirect or direct contract costs, and when they are not. The section generally allows training and education costs if they are related to the employee’s current field of work or a field the employee may reasonably be expected to enter, but it then carves out several important exceptions. Those exceptions cover overtime compensation for training, salaries paid while employees attend certain classes during working hours, the cost of full-time graduate education beyond a limited period, grants and similar contributions to schools or training institutions, education costs for non-bona fide employees, a narrow foreign-posting exception for dependent education, and contractor contributions to college savings plans for dependents. In practice, this rule helps distinguish legitimate workforce development from unallowable personal benefits, charitable contributions, or excessive educational support. Contractors must document the business relationship of the training, apply the specific exclusions carefully, and ensure costs are charged consistently and in accordance with cost principles. Contracting officers and auditors use this section to test whether claimed education costs are reasonable, properly supported, and not shifted into government contracts when the regulation makes them unallowable.
Key Rules
Related training is generally allowable
Training and education costs are allowable when they relate to the employee’s current field or a field the employee may reasonably be expected to work in. The key test is business relevance, not whether the training is generally useful or desirable.
No overtime for training
Overtime compensation paid for time spent in training or education is unallowable. Contractors cannot increase allowable labor cost by treating training time as overtime.
Limited pay for classes during work hours
Salaries paid for attending undergraduate classes or part-time graduate classes during working hours are unallowable, unless unusual circumstances make attendance outside regular working hours impracticable. The exception is narrow and should be supported by facts.
Full-time graduate education is capped
Costs connected with full-time graduate education are unallowable for any portion of the program beyond two school years or the length of the degree program, whichever is less. Covered costs include tuition, fees, materials, textbooks, subsistence, salary, and other related payments.
Grants and scholarships are contributions
Grants to educational or training institutions, including donated facilities or property, as well as scholarships and fellowships, are treated as contributions and are unallowable. These are not ordinary training costs because they are not tied to a specific employee training need.
Nonemployees are not covered
Training or education costs for people who are not bona fide employees are unallowable. The only stated exception is for dependent education in certain foreign assignments, and even then only as part of overseas differential pay when suitable public education is unavailable.
College savings contributions are unallowable
Contractor contributions to college savings plans for employee dependents are expressly unallowable. These payments are treated as dependent-benefit support, not allowable training or education expense.
Responsibilities
Contractor
Determine whether each training or education expense is sufficiently related to the employee’s work field and document the business purpose. Exclude overtime training pay, disallowed class-time salaries, excess full-time graduate education costs, contributions, dependent college savings payments, and any education costs for nonemployees unless a specific exception applies.
Contracting Officer
Evaluate proposed or claimed training and education costs for allowability under the cost principle, and ensure unallowable portions are not reimbursed through contract pricing, billing, or indirect cost rates. Seek supporting documentation when the relationship to the employee’s work or the applicability of an exception is unclear.
Auditor or DCAA
Test whether the contractor applied the rule correctly, including whether the training was work-related, whether any claimed exceptions are supported, and whether unallowable components were properly segregated and excluded from cost pools or billings.
Agency or Program Office
When approving or funding training-related efforts, ensure the arrangement does not shift unallowable education, contribution, or dependent-benefit costs to the contract. Coordinate with contracting personnel if special foreign-posting or workforce-development circumstances are involved.
Practical Implications
This section is often about allocation and documentation: a training expense may be allowable in principle, but specific components such as overtime, dependent benefits, or excess graduate-school costs may still be unallowable.
Contractors should separate tuition from salary, travel, subsistence, and other related costs so unallowable portions can be identified and removed cleanly.
The foreign-assignment dependent-education exception is narrow and should not be used as a general justification for paying school costs for dependents.
Full-time graduate programs require close tracking of the two-school-year/degree-program limit; costs after that point are unallowable even if the employee remains enrolled.
Grants, scholarships, and donations to schools are commonly mistaken for workforce development, but this rule treats them as contributions and disallows them unless another specific authority applies.
Official Regulatory Text
Costs of training and education that are related to the field in which the employee is working or may reasonably be expected to work are allowable, except as follows: (a) Overtime compensation for training and education is unallowable. (b) The cost of salaries for attending undergraduate level classes or part-time graduate level classes during working hours is unallowable, except when unusual circumstances do not permit attendance at such classes outside of regular working hours. (c) Costs of tuition, fees, training materials and textbooks, subsistence, salary, and any other payments in connection with full-time graduate level education are unallowable for any portion of the program that exceeds two school years or the length of the degree program, whichever is less. (d) Grants to educational or training institutions, including the donation of facilities or other properties, scholarships, and fellowships are considered contributions and are unallowable. (e) Training or education costs for other than bona fide employees are unallowable, except that the costs incurred for educating employee dependents (primary and secondary level studies) when the employee is working in a foreign country where suitable public education is not available may be included in overseas differential pay. (f) Contractor contributions to college savings plans for employee dependents are unallowable.