War for workers sets off emerging benefit trend: Free college tuition
Sara Vanderhoof teaches preschool kids every day. But when it came to her own education, she always felt she was missing one important asset: Her college degree.
The 46-year-old teacher in Flanders, New Jersey, who works for Bright Horizons — a company with 20,000 employees that serves more than 100,000 children across the country — had wanted to go back to school for years, yet she didn’t think it was possible because of financial constraints. That changed recently when her employer announced it would pay for its employees’ associate’s or bachelor’s degrees.
“I will actually be able to pursue my bachelor’s degree, which not only allows me to fulfill a dream of mine, but will also make me a better teacher for my students,” she says.
Vanderhoof is one of the growing number of employees taking advantage of an emerging benefits trend: free college tuition. Bright Horizons, the Walt Disney Company, Discover, MGM Resorts International, U.S. Xpress and Walmart are among the employers that have recently announced they will foot the bill for employees to get college degrees as the war for talent heats up and employers see the effects student debt is wreaking on the workforce.
Free tuition benefits “are pretty amazing when you think about it,” says Julie Stich of the International Foundation of Employee Benefit Plans, a nonpartisan group that counts more than 8,200 organizations and 32,000 individuals as members. “It’s reflective of the times we’re in right now where we’re all scrambling to find the key, perfect person to fill job openings.”
With the unemployment rate dropping to 3.7%, a 48-year low, according to the latest Labor Department statistics, a number of employers are beefing up their education benefits to entice and retain workers. Roughly half of companies now offer some sort of tuition reimbursement program, according to the latest statistics from the Society for Human Resource Management.
Free college tuition is a powerful next step.
Starbucks first blazed the trail by implementing a free tuition benefit for its workers back in 2014 — employees without a bachelor’s degree who work at least 20 hours a week in any U.S. company store can participate in Starbucks’ partnership with Arizona State University’s online program. Since then, a handful of companies have followed suit in the last few months, pointing to an emerging trend.
“It used to be that health insurance, life insurance and a retirement plan was enough — that got you retention, and that got people in the door,” Stich says, adding that there are no available statistics on the prevalence of free tuition benefits from her group or SHRM. “But now there are more and more things employers have to offer. Sometimes we see these ‘wow’ benefits crop up, and right now, it looks like [free tuition] is the next one.”
Rachel Carlson, CEO of Guild Education, a Denver-based company that administers tuition benefits for employers and partners with Disney, Discover and Walmart on their programs, says the emerging offering signifies a priority shift among benefits departments.
“HR leaders have historically thought of benefits as a cost center,” she says. “But when companies do the math, it’s cheaper to invest in the college education of a current employee than to watch that employee walk out the door.”
Jon Kaplan, vice president of training and development at Discover, which earlier this summer announced it is offering its 16,500 employees the chance to get full-ride tuition, agrees. “In order to be competitive in the job market, we need to step up and provide benefits that are distinctive,” he says.
Employees of the credit card giant can earn a bachelor’s degree online from three different universities: the University of Florida, Wilmington University and Brandman University. Dubbed the Discover College Commitment, the benefit covers tuition and required fees, books and supplies.
About 99% of the company’s employees will qualify for the benefit, including full-time and part-time workers who work at least 30 hours a week, Kaplan says. Discover expects a number of its customer call center employees, many of whom do not have a college degree, to take advantage of the benefit.
“We want to invest and develop our employees,” he says. “We feel that providing a no-cost college education to employees will not only help each employee who takes part, but the company overall.”
“We want to invest and develop our employees.”
Doing the right thing is a sentiment echoed by other employers that are implementing the benefit. Jayne Parker, senior executive vice president and chief HR officer for the Walt Disney Company, says the entertainment giant’s new offering was born of its desire to “empower and support employees in their professional and personal lives.”
“We are constantly looking at ways to help people realize their ambitions and fulfill their dreams,” she says. “This program is the latest in that effort.”
Disney’s “Aspire” program, announced in late August, is designed for the 80,000-plus hourly-wage earners who work at Disney’s studio, theme parks and stores. Its program through Guild Education offers Disney employees “maximum choice and flexibility with their studies, regardless of whether the program and classes they choose are tied to their current role at Disney,” the company says. A network of schools and a range of degrees and disciplines — including bachelor’s and master’s degrees, high school equivalency, English-language learning and vocational training — will be available for employees.
Companies like Disney are paying the costs upfront — averting a cost barrier that often deters lower-income workers.
Recruiting hard-to-reach workers
Part of the motive behind offering free tuition as an employee benefit is recruiting hard-to-reach workers in industries that are struggling.
Walmart, for instance, is catering its tuition benefit to its employees in retail — an industry that’s finding it increasingly difficult to hire and keep employees, especially as potential workers seek positions with more flexible hours and higher pay. According to data from the Bureau of Labor Statistics, job openings within the retail trade sector have risen each consecutive year since 2010 to reach a record monthly average high of 651,000.
Walmart’s program, which debuted in May, isn’t exactly free, but it’s close, allowing eligible employees to pay just $1 a day to earn a degree. All Walmart and Sam’s Club workers in the U.S. will be eligible as soon as they’ve been with the company for 90 days. It applies to all part-time, full-time and salaried employees.
It’s the latest in a string of wage and benefits enhancements for the nation’s largest private employer, which in the last year alone has raised hourly wages, expanded parental leave and added an adoption benefit. It’s all part of an effort by Walmart to keep and woo workers, possibly while shedding its image as a less-than-progressive employer along the way. As many as 68,000 employees might sign up for the tuition benefit, Walmart executives estimate.
Meanwhile, trucking company U.S. Xpress Enterprises — which employs more than 7,000 drivers across the country — in September announced free tuition in a bid to lure and keep more drivers behind the wheel of its trucks. That historically has been a huge problem: Like most trucking companies, U.S. Xpress has a nearly 100% annual turnover rate among its drivers, requiring the company to recruit, hire and train about 7,500 drivers every year.
“We believe the [tuition] program will attract people to our industry who may have not previously thought about driving a truck,” says CEO Eric Fuller, adding that it typically costs the company more than $5,000 to recruit and train a new driver.
U.S. Xpress partnered directly with Ashford University to allow its employees — as well as their children — the opportunity to earn an associate’s, bachelor’s or master’s degree in the field of their choice at no cost through online courses offered by the school.
Similarly, MGM Resorts — which said it will begin to offer its U.S. employees a free online college education this fall — is partnering directly with the Nevada System of Higher Education for its benefit.
Meanwhile, Bright Horizons is offering the perk as a volley to attract people working in education — an effort made especially vital by a decline in the number of people pursuing education degrees.
According to the U.S. Census Bureau, the number of people pursuing education degrees has declined to just 7.6% in 2018 from 21.6% in 1975. That number is even lower for those specializing in early childhood education: According to the National Center for Education Statistics, early education degrees account for less than 3% of college degrees.
“Fewer and fewer people are studying early childhood education and joining the field,” says Bright Horizons CEO Stephen Kramer. “To be successful, we needed to think about how to get people to join the field and be interested in early childhood education.”
Bright Horizons’ new benefit allows all of its full-time workers — including teachers, assistant teachers and other staff — to earn a full-ride degree in early childhood education at one of four online schools: Ashford University, Northampton Community College, Rasmussen College and Walden University.
“Our teachers are our greatest asset,” Kramer says. “We did some digging to find out what they thought about the tuition assistance benefit we were previously offering. It turns out that program had fairly low utilization because even though the tuition program was helpful, there were still barriers to financing a degree when the large majority [of costs] needed to be paid out of pocket.”
In addition to tuition and expenses, individuals who sign up for the benefit will have the support of an education adviser who will help them determine the right program to meet their career goals and fit within their personal lives. The Early Education Degree Achievement Plan will be administered through EdAssist, provider of tuition assistance and student loan repayment benefits and a division of Bright Horizons.
Changing workers’ lives
The companies offering the benefit say it’s paying dividends for their workers.
Maribeth Bearfield, Bright Horizon’s chief human resources officer, says though the program just recently launched, it’s already a hit, noting “strong interest in participation” and “incredibly positive” employee reaction.
“In the first week the program was live, we received almost 1,000 inquiries from center employees and signed up over 700 employees for introductory advising sessions,” she says. “The numbers have continued to grow since then.”
Free tuition benefits also are a way to take aim at student debt, a growing pain point for employers. There are now 44 million Americans who owe a total of $1.5 trillion in student loan debt, exceeding both credit card debt and auto loan debt, according to the Federal Reserve. That debt, experts contend, is also taking an enormous emotional toll on employees — also wreaking havoc on productivity and presentism in the workplace.
“As employers investigate the ways student debt affects their workers — and how they can help — I think some of them are thinking, ‘Hey, let’s go back a bit and see if we can help people from incurring the debt to begin with,’” Stich says.
Of course, the benefit is a big bet for employers — and a costly one at that. While they are averting higher costs by partnering with online schools — which cost thousands less than traditional school settings — there’s also the real chance that once employees get a degree through their employers, they may go somewhere else to use that degree to its fullest potential, Stich notes.
Those concerns will likely temper employer fervor to offer the benefit, but the trend might make a difference in other ways, including by raising the prevalence of other tuition benefits.
“Employers may not dive in full force and pay for everything,” Stich says. “But I think they’ll look at what they’re offering — maybe increase the dollar amount, cover more things, open it up or reduce some of the limits they have had. It’s something to watch.”