Tax-Free Education Benefit?

I work for a university and my spouse currently is in grad school at the same university. Since I am employed there, my spouse receives grant-aid that covers every tuition dollar up front, but we will need to at some point reimburse my employer for the taxes on each tuition dollar (we haven't yet). The tuition money they cover for my spouse is shown on my W-2 as taxable income. We receive a 1098-T.

Is this tuition benefit we receive considered part of a "tax-free" benefit? It is from my employer, but it is also considered taxable income... so my inclination is to say no?