Over the past year or so, thousands of people have become eligible to attend college at low or no-cost — and that’s not thanks to a new government policy or a sudden drop in tuition levels.
It’s because major employers from McDonald’s MCD, -0.39% to Disney DIS, +3.11% have launched or expanded programs that allow some of their employees to attend certain colleges and take certain courses on the company’s dime. Walmart WMT, -0.11% announced this month that the retail giant would extend its educational assistance benefits program to high school students. Through the program, teens working at Walmart will have access to flexible schedules, free standardized test prep and up to seven hours of free college credit.
The company also added 14 more degrees to the suite of programs employees can pursue for $1 per day and introduced a completion bonus for workers who finish their bachelor’s degrees and haven’t completed any previous college credits.
“It’s become pretty trendy for these big corporations to offer higher education benefits, tuition benefits, degree programs, things along those lines to help students,” said Kevin Kinser, a professor at Penn State University and head of the school’s Department of Education Policy Studies. “It clearly represents the anxiety around attending college particularly for lower-income individuals that many of these companies seem to be targeting for employment.”
And indeed, rising college costs, growing student debt and the increased need for a college degree to secure a decent living have fueled the rise of these programs in recent years. But the new programs represent the latest iteration of a perk that’s been around for decades.
Tuition reimbursement programs have been essentially ubiquitous at major employers for years. But those programs, which provide workers with money for tuition after they’ve already paid it, have relatively low participation rates and are typically geared towards white collar workers looking to improve their skill set, including through earning a graduate degree.
The new rash of tuition help is geared towards a different audience — low-wage workers who may not have a college degree. They’re also typically structured differently. With these new initiatives, the company often pays the employee’s tuition directly to the school through an agreement the two parties have worked out. In some cases the programs are facilitated through a third party that processes the tuition payments and allows workers to access the courses and degrees offered relatively seamlessly.
‘It clearly represents the anxiety around attending college particularly for lower-income individuals that many of these companies seem to be targeting for employment.’
The parties typically able to negotiate a deal whereby employees have their entire tuition bill covered. Under more traditional tuition reimbursement plans, the company money functioned as sort of voucher that offset the cost partly, but not completely. But this new setup also means that to receive the benefit, employees have to attend specific schools and in some cases earn specific credentials.
So what’s behind the growth in these programs and what does it mean for students, colleges and companies? We break it down.
Companies need to stand out in a tight labor market
Arguably the first major example of these programs is a partnership between Starbucks SBUX, +0.31% and Arizona State University that began in 2014. When the program initially launched, the company paid for Starbucks employees working an average of 20 hours per week to finish up the last two years of their degree for free through ASU’s online program. In 2015, the company expanded the program to cover four years of tuition.
The idea for the program came from talking to the company’s employees and learning that many had a desire to finish college, but couldn’t afford it, said Noelle Novoa, a senior manager for social impact communications at the company. Starbucks officials realized they could help, she said.
The tuition coverage also fell in line with Starbucks’ history of offering generous health insurance and other benefits to its baristas — a move that helped them attract and retain talent. But by 2014, when the company announced the program, Obamacare had made access to health insurance more of a norm for a wider swath of workers. The ASU program helped to keep Starbucks at the top of the heap when it came to benefits packages, the company’s then-CEO Howard Schultz told the Atlantic in 2015.
“It really goes back to what are the most innovative benefits that we can provide,” Novoa said.
Now, more than 12,000 Starbucks employees participate in the program and nearly 3,000 have graduated, she said.
Workers tend to stick around when their company pays for their education
Today, that competitive pressure is more urgent than ever.
“Companies, now that the labor market is tight, are trying to figure out what’s a smart way to attract and, especially, retain employees,” said Peter Cappelli, the director of Wharton’s Center for Human Resources at the University of Pennsylvania. And these programs tend to work in that regard, according to a study conducted by Cappelli. He found that offering tuition assistance allows companies to hire better quality and more productive employees, making the cost worth it.
And indeed, Novola said the tuition assistance is attractive to prospective employees. Roughly 60% of new hires said they’re interested in learning more about the program and 17% of applicants said the perk is the driving reason they applied to work at Starbucks.
In addition to being a great recruitment tool, Cappelli’s research found that tuition assistance can also help retain employees. Workers stick around while they use the benefit in order to finish their degree, which often takes many years because slugging through college part-time while working can be a slow process, the research found.
“You might think somebody cynical would say, ‘They’re just staying until they get a degree’ — and so what?,” he said.
Companies get a great return on investment in terms of publicity
The cost of college and student debt is top of mind for a wide swath of Americans and policymakers. That means, “in terms of PR, being able to do something about this would be a terrific thing,” Cappelli said.
Some employees certainly do benefit from the programs. But the limits on where the perk can be used, what workers can study and how challenging it can be for employees to make it through school while working at the same time mean that the companies have probably run the numbers and know that offering the benefit is not going to be super costly, Cappelli said.
“It sounds a lot better than it is,” he said. “Nevertheless it is something.”
Companies that offer these programs say they’re a valuable investment in their workforce. Disney, launched its Aspire program last year with an initial investment of $150 million over five years and plans to add up to $25 million more each year. Thousands of employees are taking classes through the program, Bob Iger, Disney’s CEO told shareholders in March. “Nothing would make me happier than if we had 100% of our eligible cast members take full advantage of this opportunity,” he said.
Starbucks is committed to helping at least 25,000 employees graduate by 2025, Novoa said, which the company estimates will cost at least $250 million.
Michelle Malashock, a Walmart spokeswoman, said the company isn’t yet comfortable sharing the amount of money it’s spending on the program, but she described it as “a significant investment.”
“There are a lot cheaper ways to get headlines,” she said. So far, about 7,800 Walmart employees have been accepted into the program and roughly 5,000 of those are working towards a college degree. The company also has plans to expand the tuition benefit to include vocational training programs and degree programs in health careers, among others. “We will continue to expand until we truly feel like everybody has an option,” she said.
The constant need to upskill
These days, given globalization, technological change and other forces, it’s rare that an employee will be able to survive in their career long-term without adding new skills, whether that’s a full degree or some kind of certification.
Companies are starting to have a better understanding of this trend and the skills required from their workers to meet their business needs — and they’re willing to pay for workers to meet those needs, said Jaime Fall, the director of UpSkill America at the Aspen Institute, an employer initiative promoting training and advancement opportunities for workers.
Part of the motivation for launching Walmart’s education benefits program was to help employees continue to build their skills so they’re prepared for a long career at the company, Malashock said. The company chose to add 14 degree offerings focused on technology to the program last month in part because like many retailers, Walmart is becoming more and more of a technology company, Malashock said.
“We know the workforce is changing and we believe that our associates want to be in the position to come along on the ride with us,” she said.
Ideally, tuition benefit programs are designed in a way that address a skills gap within an employer’s workforce or other challenge a company may be facing, said Vivek Sharma, the chief executive officer of InStride, a company launched out of Arizona State University this year that helps employers design and manage these programs.
“The focus is less on starting with what universities have, but more on starting with the actual problem the organization is facing, and translating that into how a university can help the employer, the employee and the community,” he said.
The rise of online education
The growth in online education over the past 15 or so years had made it much easier for companies to offer these programs at scale to workers across the country and even around the world. Companies are typically partnering with at least one institution with online programs in offering this benefit.
After launching the ASU-Starbucks partnership in 2014, EdPlus, an institution within ASU that designs online courses and degree programs for the school, was able to use that as a model to work with other companies to offer similar programs, said Sean Hobson, chief design officer at EdPlus.
ASU is one of the major leaders in online higher education, but over the past several years, a number of other colleges have worked to increase their prowess in this space.
For example, one of Walmart’s partners in its program is Purdue Global, an all online arm of Purdue University that was created when the school acquired Kaplan University, a for-profit college.
Colleges are hungry for students
Over the past several years, demographic trends have caused the number of high school graduates to drop. That means colleges have fewer students to pull from and some are struggling to balance their budgets amid enrollment challenges.
In this environment, a partnership with a company that brings in at least some number of students, guaranteed, is attractive to colleges, said David Bergeron, a senior fellow at the Center for American Progress, a left-leaning tank.
“These are programs that are designed to be revenue generators, whether we call it profit or excess revenue it’s basically the same thing,” said Kinser, the Penn State professor.
These programs are likely poised to grow
Infrastructure is building around these programs, indicating they’re likely to become even more widespread.
Companies are forming to help facilitate partnerships between businesses and colleges. One is Denver-based Guild Education, which was founded in 2015 and works with companies like Walmart to streamline the system students use to access the programs, offer support services and the process by which companies pay the tuition.
And, earlier this year, ASU partnered with a global impact investing fund to launch Sharma’s company, InStride. InStride came out of the model EdPlus pioneered with Starbucks, Hobson said.
As these partnerships between employers and colleges grow, they won’t replace traditional higher education, but they may play an important part in the sector’s future. Already, our nation’s colleges are shifting from places dominated by 18 to 24-year-olds who recently left home to adult, working students — exactly the group may of these programs target.
In addition, given the high cost of college, many Americans may never gain access to higher education without some kind of employer help.
“It’s a door that’s so closed to so many people that I think they have to be looking at alternate pathways,” Fall said. “As employers are willing to pick up the tab, that’s certainly going to draw more higher education players into the market.”
What employees/potential students should keep in mind
Employees considering taking advantage of these types of programs should ask themselves some questions, according to Bergeron, including: Will your employer will support a major or program that makes sense for your career trajectory? And do the completion rates for these programs for students like you indicate you’d be successful?
Balancing work and school often means students may struggle to make it through the program in a timely fashion. In addition, achieving success through online programs — what many of these partnerships offer — can be particularly challenging for students who have traditionally struggled in higher education.
In some cases, the employers acknowledge these challenges. Over the course of offering its program, Starbucks realized that roughly one in five of its employees had an academic history that would mean they couldn’t get into ASU, Novoa said. In response, they launched a program in 2017 called Pathway to Admission, which offers employees who don’t meet ASU’s admissions standards the opportunity to take up to 10 courses for free to qualify.
Working with one specific college allows Starbucks to tailor its benefit, including with programs like Pathway to Admission, to meet the needs of the students participating, who are also working part-time, Novoa said. “There’s a lot of great support that ASU provides in terms of guidance counselors and tutors and mentors,” she said.
For Walmart, part of the appeal of partnering with Guild is that the organization has screened the university partners to make sure they have a track-record of success with adult and working students, Malashock said. In addition, Guild offers individual coaching and other resources as part of its programming.
But even with these kinds of supports, Bergeron suggests potential students weigh whether their degree would provide them with a bigger economic boost if they earned it another way.
“Think really hard about whether this is the right thing for you or whether you should enroll full-time and get and complete the degree as quickly as possible,” he said.