Why Employers Should Fund Debt-Free Education Programs

ByElizabeth J. Bohn

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Most organizations that offer educational benefits require employees to pay upfront for courses, followed by some percentage of reimbursement. This limits who can afford to further their education: typically, those with robust savings and prior degrees are the ones who take advantage of the benefit. Recent analysis and data from Walmart and other organizations that employ frontline workers suggests there’s a better, more equitable way: offering educational benefits at no cost. The employees who take advantage of this offering are more likely to see salary increases and promotions, and employers benefit from attracting talent and retaining more-loyal workers.

Providing frontline workers with the education and skills they need to succeed in their current jobs and broader careers is a proven way for employers to bridge a widening economic divide — and to attract, develop, and retain a workforce that has grown more selective and scarce during the pandemic. These programs, though, often exist with structures and well-intentioned financial barriers that prevent those who might benefit the most from taking full advantage of their promise. By one 2015 estimate, U.S. employers spend $177 billion annually on formal education programs (and the current number is likely even higher).

However, employees without college degrees — many of whom are people of color — are the least likely to use them further widening the U.S. income inequality gap.

The most common form of employer education program funding today is capped tuition reimbursement, a mechanism that has effectively served the cohort it was built for — the economically secure employee who has available money in their savings. However, the legacy structure creates an often insurmountable pocketbook expense for frontline workers and significant short-term, and sometimes longer-term, debt. The majority of frontline workers cannot afford to pay for tuition upfront which makes the tuition reimbursement model difficult to sustain.

Many employers have also implemented partial funding of education programs in the belief that direct financial “skin in the game” represents co-investment and commitment. This is a broken barometer: Like capped tuition programs, out-of-pocket expenses are a still a blocker, both for the tuition itself and for things like the child care and reduced hours at work — even the prospect of spending less time spent with family is an opportunity cost. Not surprisingly, the total financial burden associated with enrolling in an education program remains the number one barrier to enrollment and the primary reason for dropping out.

A Better Approach to Employee Education

America’s leading employers have the opportunity to change this dynamic. New data demonstrates that both employees and employers benefit significantly from removing these two types of education funding requirements. Natalie’s organization, Guild Education, partners with the largest employers in the U.S. (like Walmart, where Lorraine works) to reskill their workforce through education. Offering both fully- and partially funded-education programs to millions of eligible employees allows us to study the impact of removing financial barriers.

Guild analyzed 15,000 prospective students in the calendar years of 2020-2021, across multiple employers that offered both full and partial tuition assistance to quantify the impact of financial barriers to education.

The first measurable impact of a fully-funded upfront academic program is the increase in frontline worker enrollment. Consistently, low wage earners are much more likely to enroll when they are presented with the choice of a debt-free program that eliminates out-of-pocket expenses.

Once enrolled, the income distribution of students demonstrates a clear preference for debt-free programs among the lowest wage earners. Across employers offering both debt-free and skin-in-the-game programs, the former attract up to 23% more students living in a zip code with a median per capita income below $30,000, creating a more equitable playing field for a previously underserved population.

Employees also benefit financially. Those who participate in debt-free education programs are rewarded with a 2.4x higher wage increase relative to non-students in their first year of student enrollment, and are 80% more likely to be promoted. Their appreciation for their employer is also reflected in significantly higher engagement scores for career development, well-being, and future success.

Employers benefit from offering debt-free programs to their front-line workers as well. With 48% of American workers telling Gallup that they’d be ready to switch to a new job if offered skills training opportunities, the value of the debt-free education program in terms of brand name, talent attraction, and employee retention is hard to overstate. Employers working with Guild Education to offer debt-free funding observe first year hire participant turnover rates 2.5x lower than that of their non-student counterparts — this despite few companies in our sample requiring employees to stay for a certain amount of time in order to participate. For example, in October 2019, Chipotle expanded its education program to include debt-free college degrees. Employees participating in their program, 85% of whom are restaurant workers according to CFO Jack Hartung, are 350% more likely to stay with the company. Additionally, they are seven times more likely to move up into management.

Early Success at Walmart

A recent change at Walmart illustrates the benefits a debt-free education program can have. Prior to July of 2021, part-time and full-time associates at Walmart and Sam’s club were charged $1 a day to participate in their Live Better U program, whereby any employees could attend one of 15 colleges, universities, and learning providers to study for high school completion, a certificate, an associate’s or bachelor’s degree, and more. (Guild Education has been partnering with Walmart on these efforts since 2018).

This program was initially designed after consulting with experts, reviewing other employer-provided education programs, and studying research around what helps drive completion rates among adult working learners. But the economy and job market changed against the backdrop of the pandemic and Walmart needed new ways to upskill talent and prepare associates for the future of work.

As a result, the nation’s largest retailer announced that it would pay 100% of tuition and books through Live Better U, allowing associates to earn college degrees or learn trade skills without the burden of education debt — or without being required to stay with the company for a specific amount of time in exchange.

In the first four months since removing the $1-a-day financial barrier, response to the Walmart-paid program has been overwhelming. In that time, over 90,000 employees have created an LBU account, a 2.5-times increase over the same timeframe last year. Indicative of the financial hurdle that the $1 a day program created, two out of three of existing employees engaging with the program had been with the company for over a year.

The new offering is also serving as a talent attraction mechanism. New hires are opening an LBU account within 30 days of hire at a 1.9-times higher rate year-over-year. Reflecting its broad appeal, the new hires enrolling in the program are 1.2 times more likely to be employees of color than the Walmart associate population as a whole.

In light of these strong results so far, Walmart has committed to invest nearly $1 billion in career-driven training and development over the next five years.

A Call to Action

The labor market, reskilling demands, and the data supporting the value of debt-free programs create a unique moment for American employers with a significant frontline workforce to step up. Straightforward changes to the funding of existing education programs can recast them in a more equitable way to attract, develop, and retain employees. We recommend reassessing the equity and appeal of your organization’s existing education programs with the following considerations in mind:

  • Review the outcomes of your current education program offerings. Are enrollees and graduates of your current education program representative of your workforce demographics? Are the benefits meeting their stated performance outcomes? And are the programs you offer aligned with your organization’s future of work roles?
  • Acknowledge that frontline workers already have “skin in the game” in the form of additional costs like child care, reduced hours at work, and less time with family. Instead of asking them to contribute even more, consider introducing financial policy elements such as debt-free programs for tuition and textbooks to reduce the inequitable financial barrier to entry.
  • Manage education benefit budgets through targeted partnerships with lower-cost academic institutions that cater to working adults, have a proven track record, provide remote and in-person options, and offer programs that align strategically with the career pathways of your workforce.

While the approach employers select to roll-out debt-free education programs may vary, the success of early adopters like Walmart and Chipotle has reduced the uncertainty of positive outcomes for frontline employees and their employers. As more organizations follow their lead, employer-led investment in debt-free education will pave the way for a more equitable workforce of the future.


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