The Case for Tuition Assistance

Posted by Penn Foster on July 5, 2018

Almost every industry is feeling the effects of the skills gap. It's a problem that's not likely to be solved by educational reforms alone, especially in the short-term. Companies need trained, qualified employees now, not four years from now when college freshman become graduates, and certainly not 16 years from now when today's first-graders get their diplomas.

Instead of waiting for an educated and perfectly qualified candidate to walk through the door, companies are taking matters into their own hands with tuition assistance programs. These programs become part of the employee's benefits package, helping companies to attract and retain valuable workers.

Investing in employee education does more than train your employees. It also shows them that your business cares about them and their development. Tuition assistance programs have been shown to increase retention, boost employee satisfaction, and reduce recruitment and hiring costs.

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Tuition assistance actually saves money (and time)

The big tuition assistance success story that just about everyone has heard by now is the health insurer Cigna. A study by Accenture found that Cigna realized a dollar for dollar return on investment through their tuition assistance program. They saved an additional $1.29 per dollar spent by reducing employee turnover and recruitment needs. Participants in that study were 8% more likely to stay with the company and 10% more likely to be promoted.

Despite those heartening results, the number of organizations that offer educational assistance to employees has dropped since 2014. As of 2017, about 53% offered undergraduate assistance while 50% offered graduate support. 

Surveys suggest that dropping tuition assistance programs is a short-term savings with long-term negative consequences. In the EdAssist Student Loan Debt: Who's Paying the Price? Survey 65% of respondents rated tuition assistance as one of the best benefits offered by employers and 79% said tuition assistance was a very important factor in their decision to work for a particular company.

In short, employees want to work for companies that offer tuition assistance, and they're likely to stick around longer at those that do.

Tuition Assistance Models

The average annual tuition reimbursement, based on the Deloitte Total Rewards Practices survey is about $4,000 per year. Up to $5,250 can be excluded from the employee's wages for tax reporting purposes, which is where many companies set their cap.

Tuition assistance programs are as varied as the companies that provide them. Some pay partial tuition and expect employees to pay the rest. Others cover not just tuition but also books, supplies and even employee's home internet connections to help them access online courses.

Most have some sort of stipulation attached. For example, the student must maintain a certain grade-point average in order to get the tuition benefit, or the employee must agree to stay with the company for a certain amount of time to be eligible for the credit.

Fully paid vs partial paid

Church's Chicken implemented a fully paid solution for employees who wanted to earn a high school diploma. Their goal was to retain more employees and reduce hiring costs by hiring from within.

The restaurant chain paid for 100 percent of all costs associated with employee's high school degree or equivalent education, and partnered with Penn Foster to provide a completely online self-paced curriculum.

Within 6 months, the program had proved so valuable that they expanded it to all company owned restaurants. Employees in the program stay at Church's 2.5x longer than non-program employees.

Some companies offer partial paid solutions instead. Most recently, in May 2018 Wal-Mart announced a partial-pay plan for their associates. Employees will pay $1 a day to work toward a business or supply-chain management degree at one of three non-profit colleges. The company will pay the remainder of the cost for books, fees, and tuition.

Walmart's VP of People Innovation told Bloomburg "We felt strongly that this is something that would improve their lives and help us run a better business."

Reimbursement or education voucher

UAW-Ford needed to develop a pipeline of qualified candidates for their Joint Apprenticeship Program. With Baby Boomers retiring, they simply didn't have enough skilled workers to do the job. So they introduced an education voucher system to help employees get the education they needed.

They worked with Penn Foster to develop a custom curriculum for Ford's Industrial Readiness Certificate Program. The employees were able to self enroll in one to three courses. They paid with a voucher which was then reimbursed by UAW-Ford.

The result: over 400 employees completed all three courses in just one year and became eligible for the Apprentice Program. Employees got the opportunity to expand their skills and earn more money, while UAW-Ford got a pool of qualified candidates to train into the skilled employee they so desperately needed.

Another prime example is the Amazon Career Choice program. Amazon will pay as much as 95% of tuition and fees, with a cap of $2000. Eligible employees must pursue a certificate or diploma in a field of study that coincides with their most in-demand jobs including supply chain and logistics.

High School, College and Beyond

The models discussed above can work for high school, undergraduate, and even graduate level education as well as for certification and career diploma programs. They help students prepare for apprenticeship programs, build skills to make them more qualified for management positions, and increase loyalty toward their employer.

At the same time, companies are able to reduce the percentage of their budget spent on recruitment and hiring. They build functional talent pipelines customized to their needs. Overall, they attract more valuable candidates and retain them longer thanks to tuition assistance programs.

Encourage employees to use tuition assistance

Simply offering tuition assistance may not be enough. You have to make it clear to employees that you expect them to actually use this benefit. Sometimes tuition assistance is presented as just one small part of the benefits package, wedged between vacation days and health insurance in an employee welcome packet. Employees might not even realize it exists.

Those that do know about the benefit may think they'll be penalized for using it or asking about it. This tends to happen most often when tuition assistance funds are included in departmental budgets. Employees may be unwilling to take advantage of tuition assistance if they think their manager will we frustrated with them for using departmental resources.

Solve this problem by making sure managers are on-board. It should be part of their job to encourage their team members to take full advantage of all training and development opportunities, including tuition assistance. Help them do so by making tuition a separate budget item not tied to any one department's operating budget.

Finally, communicate clearly. Let students know what their benefit is and how to use it. Give them a point of contact (manager, HR professional, training coordinator, etc) and provide them with clear documentation of your policy. Tell them how the money will get to them. Does it appear in their paycheck, is it paid directly to the school? The more they know, the more likely they are to use this benefit.

Selecting an education partner

An education partner can help make your tuition assistance dollars go further. By striking a partnership with an accredited school or training provider, you know that your tuition dollar is being spent on a program that offers a positive return on investment.

If you're ready to build a customized solution to meet your employee's educational needs, contact Penn Foster today. We work with organizations of all sizes, across a broad range of industries - and will make sure that every employee gets the training and skills they need.