Starbucks Corp. is serving up a venti-size portion of tuition assistance to its workers.
The Seattle coffee purveyor said Monday that it would give about $6,500 a year in tuition reimbursement to employees who enroll in Arizona State University’s online bachelor’s degree programs for their first two years. That would cover roughly half of tuition costs.
Starbucks will offer full reimbursement to workers in their junior and senior years, the company said in a statement.
The assistance is open to employees who work at least 20 hours a week at any company-operated store, regardless of how long they’ve been with the company. Employees are not required to remain with the company after graduation.
The offer is yet another effort by Starbucks to retain its workforce and engender long-lasting loyalty among its employees, experts said.
“Labor is the single biggest cost for Starbucks, period,” said Sharon Zackfia, an analyst at William Blair & Co. “It’s competitive at any level to get good talent. And their belief is this is another benefit they could provide to ensure consistency and continuity in the level of service.”
Though many companies offer forms of tuition assistance, they often come with strings attached, such as requiring students to remain on the job for a number of years after getting their degrees. And years of economic turmoil have forced many corporations to cut back on these programs.
Starbucks Chief Executive Howard Schultz framed the initiative as helping employees at a time of increasing inequality in the U.S.
“In the last few years, we have seen the fracturing of the American dream,” Schultz said in the statement. “There’s no doubt, the inequality within the country has created a situation where many Americans are being left behind.
“The question for all of us is, should we accept that, or should we try and do something about it?” he added.
The joe maker has been known to offer perks unusual in the food industry, including health insurance for part-timers, employee stock options and a 401(k) matching program. Starbucks said Monday that it is phasing out a program that covers tuition up to $1,000 a year for students attending City University of Seattle or Strayer University.
Industry watchers say Starbucks could also save a bundle by driving down employee turnover, which is usually high in the food industry. Keeping employees longer would trim training costs and improve customer service, which could be a win for the company’s bottom line.
Starbucks is “probably going to look at it as an investment,” said Bruce Elliott, manager of compensation and benefits at the Society for Human Resource Management. “They are expecting to see a return by high productivity, higher employee investment and lower turnover.”
In the long run, the company could also see its healthcare costs drop by attracting a bigger pool of younger, healthier workers, Elliott said.
“They are willing to put this money upfront, they have to expect this on the back end,” he said. “They are not a charity, they are a business doing this for a reason.”
The offer has excited many Starbucks employees, including Carissa Tabura.
The 26-year-old has worked for three years at a downtown Los Angeles Starbucks and has contemplated quitting to attend college after supporting her husband through law school. But now, Tabura said, she can continue working and take online classes instead.
“I feel like it opens a bunch of doors,” the downtown resident said. “It makes me really excited because I want to go to school.”
Phil Regier, dean of ASU online and extended campus, said Arizona State is not offering a tuition discount to Starbucks employees. Depending on the course load, annual tuition usually ranges from $9,000 to $15,000 a year (each credit hour is priced at $500).
Instead, the university, based in Tempe, is working individually with these students to fashion aid packages that will marry the tuition reimbursement with scholarships, grants and federal loans.
“They will receive financial coaching and personalized advising,” Regier said.
Arizona State will reap the benefits. About 7,000 undergraduate and 3,500 graduate students are currently getting their degrees exclusively online, Regier said. The more than 40 undergraduate online degree programs include business, criminology, food industry management, information technology and nursing.
In the first year, the university estimates 4,000 to 15,000 Starbucks employees will enroll out of 135,000 workers who are eligible. Eventually, up to 20,000 students from the Starbucks program will attend each year, Regier said.
To handle that surge, he said, ASU will initially hire an additional 20 to 40 employees to work in areas such as financial aid and enrollment.
Corporate America will be watching the Starbucks venture to check for long-term benefits, experts said. But it’s unlikely that any corporation will quickly follow Starbucks and offer widespread tuition reimbursement.
“On the short-term basis, they are going to be the lone wolf,” Elliott said.