Companies lure hourly workers with college tuition perks

Business

Daniella Malave works on her laptop at a coffee shop in Sea Girt, N.J., Thursday, Sept. 29, 2022. While working full time for Chipotle, Malave completed two years of community college with annual stipends of $5,250 from the restaurant chain. After that, she enrolled in the company’s free online college program, through which she earned a bachelor’s degree in business management from Wilmington University in 2020. (AP Photo/Seth Wenig)

NEW YORK (AP) — When Daniella Malave started working for Chipotle at 17, the main benefit she was seeking was free food. As it turned out, she also got a free college education.

While working full time for the chain, Malave completed two years of community college with annual stipends of $5,250 from Chipotle. After that, she enrolled in the company’s free online college program, through which she earned a bachelor’s degree in business management from Wilmington University in 2020.

“I didn’t have to pay for my education,” said Malave, 24, who now works as a recruiting analyst for Chipotle in New Jersey. “Every time I say it out loud, I’m like, ‘Is this real?’”

Chipotle is one of more than a dozen companies that have launched free or almost-free college programs for their front-line workers over the last decade. Since 2021 alone, Walmart, Amazon, Target, Macy’s, Citi and Lowe’s have made free college available to more than 3 million U.S. workers.

Companies see the programs as a way to recruit and retain workers in a tight labor market or train them for management positions. For hourly employees, the programs remove the financial barriers of obtaining a degree.

Thousands of people are now taking advantage of the benefits. Starbucks, which operates an online college program through Arizona State University, says 22,000 workers are currently enrolled in its program. Guild Education, which administers programs for Walmart, Hilton, Disney and others and offers online programs at more than 140 schools, says it worked with 130,000 students over the last year.

But some critics question whether the programs are papering over deeper problems, like pay so low that workers can’t afford college without them or hours so erratic that it’s too hard to go to school in person.

“I do think they are providing these programs to skirt around the issue of just paying people more, giving people more certainty, improving their quality of life,” said Stephanie Hall, a senior fellow at The Century Foundation, a nonpartisan think tank.

Hall said a lack of data also makes it difficult to judge the programs’ effectiveness. Chipotle, Walmart, Amazon and Starbucks, for example, don’t share graduation rates, in part because they’re hard to calculate because students often take a semester off or take more than four years to earn a degree. Rachel Carlson, CEO for Guild Education, which also doesn’t reveal graduation rates, says the more relevant data is whether college classes help employees get promotions or wage increases.

Others question the quality of the online programs and whether students’ degrees will be marketable or help them pursue other careers, especially since many companies limit what employees can study. Discover only fully funds 18 bachelor’s degrees at eight universities through Guild, for example.

“My sense is that most of these programs are hoping that employees would stay with the company,” said Katharine Meyer, a fellow in the governance studies program for the Brown Center on Education Policy at the Brookings Institution.

Amazon for its part touts college programs that offer opportunities outside the company, like nursing. But Walmart pared down the number of programs it offers to 60 from 100 because it wanted to focus on skills that would align with careers at the company.

More than 89,000 workers have participated in Walmart’s college program and more than 15,000 have graduated, said Lorraine Stomski, Walmart’s senior vice president of associate learning and leadership.

Tanner Humphreys is one of them. He started working at Walmart in 2016, bouncing around hourly jobs as he tried to accommodate his in-person class schedule at Idaho State University. But under the company’s online program, which it launched with Guild in 2018, he transferred his credits to Southern New Hampshire University and graduated in February with a bachelor’s degree in computer science. At 27, he now works at Walmart’s headquarters for its cybersecurity team as a salaried employee.

“I was working paycheck to paycheck, living with a whole bunch of friends to pay my rent and stuff,” he said. “The change from an hourly to salary is truly life changing.”

Companies paying for college or graduate school isn’t new. But for decades, the benefit was mostly offered to salaried professionals. In many cases, workers were required to spend thousands of dollars for tuition up front and then get reimbursed by their company.

Starbucks’ program, which launched in 2014, was initially a tuition-reimbursement program, but in 2021, it began covering tuition costs upfront. Now, 85% of the company’s stores have at least one employee in the program, which will celebrate its 10,000th graduate in December.

Carlson said companies see an average return of $2 to $3 for every dollar they put into education because it saves recruitment and retention costs. Walmart said participants leave the company at a rate four times lower than non-participants and are twice as likely to be promoted.

“If I know it’s going to cost me $7,000 to have my cashier not show up tomorrow, I would rather spend our average of our partners today — $3,000 to $5000 — paying for her to go to college,” Carlson said.

Companies say the programs also give opportunities to minorities. Macy’s, which started its program with Guild earlier this year, said that half of the women enrolling are women of color.

Some companies, like Chipotle and JPMorgan Chase, offer online programs through Guild as well as stipends students can put toward in-person learning at local institutions. Amazon’s college programs offer a mixture of online and in-person learning at local community colleges or universities.

Hall said she would like to see more companies offer that kind of flexibility, since online learning isn’t ideal for everyone.

Zachary Hecker, 26, a Starbucks employee in New Braunfels, Texas, began working toward his bachelor’s in electrical engineering last summer through the company’s college program.

Hecker appreciates the free tuition, but he often wishes he could attend classes in person or have more choices beyond Arizona State. His classes are challenging, he said, and professors aren’t always able to meet and offer guidance.

But Carlson said online classes are ideal for the average Guild enrollee, who is a 33-year-old woman with children. Carlson said students in its programs often lack consistent access to a car and need to be able to study anytime, like after kids are in bed.

The chance to earn a free degree can be life-changing. Angela Batista was 16 and homeless when she started working for a Starbucks in New York.

“College was never in my dream,” Batista said, now 38. “I didn’t even have the audacity to fantasize about it.”

This December, she will graduate from Arizona State University with a degree in organizational leadership paid for by Starbucks. And now her son, who also works at Starbucks, is starting work toward his own degree.

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