Greetings,
Generally any amount paid for by your employer is considered compensation and is included in income.
If you live and work outside of the United States, then you can exclude all or part of your foreign wages from income subject to US taxation if you meet the qualifying tests, the Bona Fide Residence or Physical Presence tests.
In addition to the foreign earned income exclusion, an employee can also claim an exclusion or a deduction from gross income for your housing amount if your tax home is in a foreign country and you qualify under either the bona fide residence test or the physical presence test. For details see the article at http://www.irs.gov/businesses/small/international/article/0,,id=97143,00.html
If you qualify and can exclude amounts paid by your employer for housing; this includes any amounts paid directly to you or on your behalf for housing, rent, education for your children, or tax equalization.
Self-employed persons working abroad do not qualify for the foreign housing exclusion. Instead you can deduct your allowable housing expenses from your self-employment and thereby lower your self-employment tax.
So, the amount paid for your children's education is not taxable only if you qualify under the same rules as for foreign earned income exclusion; but independent contractors that cannot claim the foreign housing exclusion they must claim the foreign housing deduction.
Enrolled Agent
I have prepared individual, trust, partnership, and corporate taxes since 1987.