By Derek Newton
Reposted from Forbes, with permission.
To recruit new employees and hold on to the ones they have, employers are increasingly offering a potentially valuable benefit – free college tuition. Walmart, Amazon, Disney, Starbucks, Target and many other big name employers all offer some form of free college.
So far, these college tuition programs have proven very popular.
According a report from the Lumina Foundation and Accenture, nearly 30,000 Walmart employees were enrolled in that company’s tuition program, known as Live Better U. Over three years, more than 300 employees in the program have earned bachelor’s degrees. Those in the program were more likely to be promoted internally – adding upward mobility and income.
A company spokesperson for Target said that just one week after they announced their college education program in 2021, more than 10,000 team members had expressed interest in the benefit.
Tom Nathaniel Tessin drives for Uber, a job he says he has because of the college benefits. “I do Uber part-time solely for the free college tuition. I’m only four classes away from graduating and it was one thousand percent worth it,” he said. “I could not be happier with the outcome.”
That’s a win-win. The companies get better trained, happier employees that they can retain and promote. And the companies get to sell the popular benefits to job prospects.
The employees get a college education.
ut is an employer-provided free college education worth it for the employee?
The answer, experts say, is yes – getting free college tuition from your work can be an outstanding benefit.
But they also say it depends. There are some important things to understand and a few key questions to ask before applying for a job or keeping the one you have because of the promise of free college.
A Great Deal
To start, yes. Free college can be a major bonus for employees by eliminating an expense today and returning lifelong rewards such as better pay and more career opportunity. In other words, getting a degree can be a big deal, especially if it’s free.
“It could be a great idea,” said Denise Thomas, a college coach with Get Ahead of the Class. “You’d have to live on another planet to not have heard of the rising cost of college tuition, so the thought of having someone else pay for it should make your ears perk up.”
“Yes, from an overall perspective, it is a good deal,” said Wesley Exon, the founder of Best Value Schools, which helps students find schools and programs. “In most ways, it is an excellent opportunity to complete an education and avail better career options in the future.”
Still, the experts say, even though the value is there, there are some things you should understand about free college programs from your employer. “Companies that offer to pay for tuition are not doing this out of the goodness of their heart,” said Thomas.
“Companies might only be interested in paying for courses that benefit their own needs. For example, suppose you are working in the HR department,” Exon said. “In that case, the employer might only pay your tuition fees based on how many communication and marketing courses are included in your curriculum.”
Thomas agreed. “A retail department store is unlikely to pay for an engineering or history degree. They need employees with business related degrees. The degree options will be limited to what the company can use,” she said.
Target’s program, for example, says its tuition benefit program is “the most comprehensive debt-free education assistance program available in the retail industry.” But it also says the program offers access to only “business-aligned” degrees and certifications.
While tuition benefits won’t pay for an employee to study anything, work-sponsored education programs usually won’t cover tuition anywhere either.
The experts say that, most often, the degrees and certificates in a benefit plan will only be offered from a select list of colleges, usually those with large online offerings. Therefore, it’s important to ask what schools are in the program and, since the degree you earn will be yours, to be sure you’re comfortable with at least one of them.
Additionally, the experts recommend asking whether – in the event you cannot complete your degree for any reason – the credits your earned will transfer to another school.
Because some employers use tuition programs to retain employees, Imani Francies, a college advisor with USInsuranceAgents, says, “People should ask about how long they would have to stay with the company if they take the tuition.” Adding, “you may not want to stay with that company long-term.”
Taking tuition assistance, Thomas said, “usually means a commitment to working at the company for a certain number of years, or you’ll have to repay the cost that they incurred for your education. This is not uncommon. Many industries, even after obtaining your degree, have employment contracts that specify a minimum number of years of employment, or else you’ll have to reimburse the company for training you.”
Another consideration in weighing tuition benefits is the time it may take to complete a degree or certification. Even if there are no requirements to stay at a job after your education is complete, finishing a degree part time, online may take years. If takes six or seven years or more to finish a bachelor’s degree, employees should consider if they want to stay with the company for at least that long.
Taxes and Financial Aid
Tuition benefits can impact an employee’s taxes.
“Every year, federal tax law enables employees to receive up to $5,250 in tax-free tuition reimbursement from their employer,” Francies said. But, if the cost of your tuition and related expenses exceeds that, you may have to declare the overage as an income benefit, altering your tax responsibilities.
Many programs, such as Walmart’s tuition program for example, cover any employee tax consequences. But the total amount of the program and any tax implications are worth asking about before you start.
In addition, some tuition benefit programs or some colleges themselves may apply for and accept tuition assistance – grants and scholarships – on behalf of the student. Some of these grants may have annual or lifetime limits. Likewise, it’s good to ask whether your employer’s tuition program is using federal, state or private grant funds to assist in paying the costs of your educational program and know what the limits or limitations of those may be. If you leave your job and want to start college again later or somewhere else, you may find that some of your limited benefits have already been collected and spent.
Other Considerations, Costs
Even if your employer is paying for college tuition, other costs of attending college can be significant. Be sure, for example, to ask whether a college benefit plan incudes student fees, or textbooks or technology assessments that can be charged by the school. Since it’s likely that your classes will be online, experts say to ask also about the costs of the education technology you will need such as laptops, web cameras, high speed Internet or data charges for your smart phone.
And even if every direct cost of going to school is covered, there may be indirect costs to studying while working. “It’s a guarantee that you will not be paid your hourly rate while you’re taking classes, so one consideration is how much time will it take away from the hours of your paying job, or can your employment schedule work around the class hours and still get your full time and full pay?” Thomas said.
A final thing to consider, the experts say, is whether you may be offered a generous tuition benefit package instead of other benefits or rewards that may be even more valuable – a higher salary, for example.
If you’re just a few credits short of your degree, or even just starting on the college path, you may be better off to negotiate a better salary or wage and pay those educational costs yourself. With the right advice and planning, starting or finishing a college degree on your own can be surprisingly affordable and offer better flexibility than a work-provided education plan that may limit your degree or school options.
A job perk of free college tuition or continuing education can be highly valuable and deeply rewarding. But it’s still important to ask questions – to understand what obligations and commitments it requires as well as what you may be giving up if you take advantage of it.