Tuition Assistance: The “Secret” Benefit That Boosts Employee Retention
Updated September 2019
Recently, Forbes magazine highlighted a great idea with a big problem. The magazine looked at companies’ use of employee tuition assistance programs: a win-win benefit that helps workers further their educations, helps employers retain qualified staff and comes with significant tax benefits.
On paper, tuition assistance is the perfect benefit. So what’s the issue Forbes found?
In their words: “[This] can be said of the tuition assistance benefit offered by most employers: more could be accomplished if employers weren’t trying so hard to keep it secret.”
It may seem hard to believe that a $22 billion-a-year benefit offered by more than 70 percent of employers could possibly be a secret, but there is some truth to the assertion. Confusion about the program’s value, difficulty in figuring out how to manage it and lack of internal promotion combine to keep participation low. By some estimates, only about 5 percent of eligible employees take advantage of tuition assistance. It’s a huge missed opportunity—but there are ways to do better.
Good Tuition Assistance Programs Benefit Every Stakeholder
The benefit of tuition assistance for employees is obvious: more postsecondary education with less debt. As college students increasingly balance their studies with full-time work, employer-provided tuition assistance can and should be a growing piece of the financial aid puzzle. (Even though there are a lot of variables for students to remember!)
For employers, the benefits can be far-reaching.
From a human resources perspective, helping employees with their college tuition boosts both recruitment and retention. In one wide-ranging survey, 79 percent of recipients said tuition assistance was an important or very important factor in joining their company, and 81 percent agreed that “their employer’s tuition assistance program makes them more likely to stay with the organization.”
When it comes to recruiting coveted millennial employees, tuition assistance also hits the mark. A companion survey focused on millennials indicated more than half are taking classes while in the workforce, and 6 in 10 would pick a job with high development potential over one with regular pay raises.
A look at one major healthcare company puts the benefits into stark relief. In a study conducted by Lumina Foundation and Accenture, the health insurer Cigna discovered that each dollar invested in tuition assistance was earned back—along with another $1.29 in savings on recruitment and training costs. The study found that:
“Employees who participated in Cigna’s program were 10% more likely to be promoted, 8% more likely to stay with the company, and 7.5% more like to transfer within the company than employees who didn’t use the tuition reimbursement. Participants also saw a 43% increase in wages over a three-year period.”
Tuition assistance is a boon to employees, employers and the bottom line. So why isn’t it used more?
Understanding the Whos, Wheres and Whys of Tuition Assistance
As Forbes reports, part of the issue is that “[tuition assistance] is categorized as one retention-enhancing employee benefit among many—disconnected from strategic HR goals like closing the skills gap.” This mis-categorization leads businesses to see it as a niche benefit rather than a way to aggressively develop their workforce. That leads them to de-emphasize the program or make it difficult to use, rather than focusing their spending on college courses that benefit both employee and company.
In other words, while it’s generally managed like an HR benefit, tuition assistance really belongs in the world of learning, training & employee development.
When companies bring tuition assistance into this fold, the results speak for themselves. In 2015, McDonald’s introduced Archways To Opportunity, a wide-ranging employee education program that includes tuition assistance as part of a comprehensive package. The program is open to both managerial and hourly staff, and offers online high-school courses, ESL training, academic and career advisers—as well as a no-strings college tuition payment ranging from $700 to $5,250 per year.
McDonald’s retention goals may seem modest; according to Inside Higher Ed, “It’s a win-win, the company believes, if the tuition assistance program can help an employee stay on the job for more than just three months—a key milestone in the fast-food industry.” However, the program is also a powerful recruiting tool, giving the restaurant giant a competitive advantage when it comes to hiring ambitious young people seeking what the company calls “America’s best first job.”
There’s No One-Size Fits All Tuition Assistance Model
For McDonald’s—a huge corporation with a sizable recruiting and retention budget—this comprehensive, largely unrestricted model makes the most sense. But it’s also not for every company.
At Amazon, for example, tuition assistance is generous but restrictive. The Career Choice benefit pays up to $12,000 in annual tuition and reimburses 95 percent of textbook and fee costs—but the employee must be studying for a certificate or two-year degree in an identified “high-demand field.” Similarly, one aerospace and defense company profiled in the Tuition Assistance: In Demand study focused its tuition assistance dollars on managerial training and coursework for engineers (who made up 65 percent of their workforce).
And what happened?
“Training and education hours spent on job-related topics increased 30 percent. … 85 percent of the company’s aggressive training goals were met, showing strong signs of closing skills gaps.”
Clearly, tuition assistance works best when it has a defined audience and a targeted goal.
And those needs, while major, are only part of managing a successful program. Among other concerns, companies also need to decide how they’ll determine eligibility, where they’ll promote the program and how they want to manage funds. Some, like McDonald’s, pay colleges directly; others reimburse students each term; still others pay a deferred percentage depending on the employee’s time of service.
Tuition assistance is an incredibly valuable benefit to students, and an increasingly vital offering for employees. It’s also a complex program that requires thoughtful management. If you’re considering a tuition assistance program for your employees, we’d be happy to help you work out what’s best for your organization. Contact Scholarship America—we’ll help ensure your program isn’t a secret.