To recruit new employees and retain existing ones, employers are increasingly offering a potentially valuable perk – free tuition. Walmart, Amazon, Disney, Starbucks, Target, and many other major employers all offer some form of free college.
So far, these college tuition programs have proven to be very popular.
According to a report by 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 program employees graduated a Bachelor’s degree. Program participants were more likely to be promoted internally, which added upward mobility and income.
A Target spokesperson said just one week after announcing its 2021 college education program, more than 10,000 team members had expressed interest in the benefit.
Tom Nathaniel Tessin drives for Uber, a job he says he gets because of college benefits. “I do Uber part-time just for free tuition. I’m only four classes away from graduating and it was a thousand percent worth it,” he said. “I couldn’t be happier with the result.”
It’s a win-win. Companies get better trained and happier employees that they can retain and promote. And companies sell popular perks to job prospects.
Employees receive college training.
But is a free college education offered by the employer worth it to the employee?
The answer, experts say, is yes – getting free tuition through your job can be a great perk.
But they also say it depends. There are some important things to understand and some key questions to ask before applying for a job or keeping the one you have because of the promise of free college.
A good deal
For starters, yes. Free college can be a major bonus for employees by eliminating an expense today and returning lifetime rewards such as better pay and more career opportunities. In other words, getting a degree can be a big deal, especially if it’s free.
“That could be a great idea,” said Denise Thomas, college coach with Get Ahead of the Class. “You’d have to live on another planet not to have heard of the college tuition hike, so the thought of charging someone else should make your ears prick up.”
“Yes, from a global perspective, it’s a good deal,” said Wesley Exon, the founder of Best Value Schools, which helps students find schools and programs. “In most cases, this is a great opportunity to complete training and have better career options in the future.”
Still, experts say that while the value is there, there are some things you need to understand about free college programs from your employer. “Companies that offer to pay tuition don’t do it out of the goodness of their hearts,” Thomas said.
“Companies might only be interested in paying for courses that meet their own needs. For example, let’s say you work in the human resources department,” Exon said. “In this case, the employer might pay your tuition only for the number of communication and marketing courses included in your program.”
Thomas accepted. “A department store is unlikely to pay for an engineering or history degree. They need employees with business-related degrees. Degree options will be limited to what the company can use,” she said.
Target’s program, for example, claims its tuition benefit program is “the most comprehensive debt-free educational assistance program available in the retail industry.” But it also says the program offers access only to “business-aligned” degrees and certifications.
Although tuition does not allow an employee to study anything, work-sponsored education programs usually do not cover tuition either.
Experts say that more often than not, a benefits plan’s degrees and certificates will only be offered from a select list of colleges, usually those with great online offerings. Therefore, it’s important to ask which schools are in the program, and since the degree you earn will be your own, make sure you’re comfortable with at least one of them.
Additionally, experts recommend asking whether – in the event that you cannot complete your degree for whatever reason – the credits you have earned will be transferred to another school.
Because some employers use tuition programs to retain employees, Imani Francies, academic advisor at USInsuranceAgents, says, “People should ask how long they should stay with the company if they’re on tuition. Adding, “you may not want to stay with this company long term.”
Taking tuition assistance, Thomas said, “usually means a commitment to work at the company for a certain number of years, otherwise you will have to pay back the costs incurred for your education. It’s not uncommon. Many industries, even after you graduate, have employment contracts that specify a minimum number of years of employment, otherwise you will have to pay the company back to train you.
Another consideration in evaluating tuition benefits is the time it takes to earn a degree or certification. Even though there are no requirements to stay in a job after you graduate, completing a part-time degree online can take years. If it takes six or seven years or more to complete a bachelor’s degree, employees should consider whether they want to stay with the company for at least that long.
Taxes and financial aid
Tuition fees can affect an employee’s taxes.
“Each year, federal tax law allows 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 this amount, you may have to report the excess as an income benefit, which will change your tax responsibilities.
Many programs, such as Walmart’s tuition program for example, cover all employee tax consequences. But the total amount of the program and any tax implications are worth knowing before you start.
Additionally, 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 a good idea to ask if your employer’s tuition program uses federal, state, or private grant funds to help defray the costs of your course of study and to find out what any limits or restrictions may be. limits of these. If you quit your job and want to return to school later or elsewhere, you may find that some of your limited benefits have already been collected and spent.
Other considerations, costs
Even if your employer pays tuition, the other costs of attending college can be significant. For example, be sure to ask if a college’s benefits plan includes tuition, textbooks, or technology assessments that may be charged by the school. Since your classes are likely to be online, experts also recommend finding out about the costs of any educational technology you’ll need, such as laptops, webcams, high-speed internet, or data charges for your smart phone.
And while every direct cost of going to school is covered, there may be indirect costs of studying while working. “It’s a guarantee that you won’t be paid your hourly rate while you’re taking classes, so one consideration is how long will it take out of your paid work hours, or maybe your work schedule? it operates around school hours and do you still receive your full time and full salary?” says Thomas.
One final thing to consider, experts say, is whether you can 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 only a few credits short of graduating, or even if you’re just starting college, you might be better off negotiating a better salary or salary and paying for those education costs yourself. With the right guidance and planning, starting or completing a college degree on your own can be surprisingly affordable and offer better flexibility than a work-provided education plan that can limit your degree or school options.
A professional benefit of free tuition or continuing education can be very valuable and deeply rewarding. But it’s still important to ask yourself questions – to understand what obligations and commitments it entails as well as what you might give up if you take advantage of it.