Walmart and Target up the ante with ‘free college’ for employees

Both Target and Walmart made recent headlines with big investments in education benefits—making college free for their combined 1.8 million U.S. employees. The news followed similar moves by large companies, including Waste Management and JBS USA, the nation’s largest meatpacker.

Employers are doubling down on tuition benefits in part because they hope it will give them a competitive advantage in recruiting and retaining workers as the war for talent heats up. Indeed, some workers seem to be looking for that kind of support.

Roughly 60 percent of companies offer some form of tuition support, says John Dooney, HR knowledge advisor for SHRM. And 8 percent help pay off workers’ student loans as a benefit. He said both types of education assistance are likely to spread and get more generous in coming months.

“Turnover rates are really going to increase. They’re doing everything in their arsenal to prevent that,” says Dooney. “Anything that will retain employees will be increased.”

Nevertheless, big questions remain about both the immediate and the long-term impact of these moves. Evidence is relatively strong that they will help the companies with worker recruitment and retention

  • But will they actually motivate more employees—especially frontline workers—to get a college degree or other credential?
  • And if so, will that help substantially more workers advance at those companies or move into new careers elsewhere?

Kristina Francis, executive director of JFFLabs, sees a potential win-win. “Employer-sponsored education benefits drive equitable economic well-being” and “improve talent acquisition, talent development, and corporate culture while enabling employees to think long-term,” she said. 

But, Francis said, companies also have to be intentional about pairing education support with pathways for advancement. The programs, she said, “create opportunities for employers to drive employee engagement by helping workers navigate career options and map existing competencies to long-term career prospects.”

The details: Walmart is expanding its existing Live Better U. tuition program, and will now:

  • Fully cover the cost of select college degree and credential programs for any of its 1.5 million U.S.-based workers.
  • Allow participants to attend one of 10 specified academic partners.
  • Invest almost $1 billion over the next five years in career training and development, including tuition benefits.

Target is launching a new debt-free tuition assistance program as part of its sustainability strategy, Target Forward, that includes goals to create an equitable and inclusive workforce. It will now:

  • Cover the full cost of select undergraduate degrees, certificates, and certifications for its 340,000 U.S.-based workers.
  • Pay up to $10,000 each year for master’s programs at those institutions.
  • Allow participants to attend one of 40 partner institutions.
  • Invest more $200 million within the next four years in the program.

Both companies work with Guild Education, a high-profile upskilling and education platform, to help run their programs. Other major platforms adding employers of late include InStride, which recently partnered with the national OneTen initiative to bring more Black talent into major companies, and Bright Horizons EdAssist, which works with large health systems and other employers. Rio Salado College, which bills itself as America’s online community college, works with JBS USA on its recently announced program.

What workers want, and what they do

By the numbers: Workers do seem to be looking for more support from employers for postsecondary education and for thinking through their long-term prospects.

  • A recent national survey found that 63 percent of adults would be more likely to accept a job offer or stay with an employer if they provided support for education and career development.
  • And surveys by LinkedIn have consistently found that employees say they would stay at a company longer if it invested in their learning.

But, wait: Nevertheless, despite saying they want employers to support their learning, very few employees actually take companies up on it. National surveys from SHRM have found that at many companies less than 5 percent of employees participate in education benefit programs. And the group’s benchmarking studies have found a typical range of 6 to 8 percent. Likewise, more than 4 in 10 participants in tuition benefits programs already have degrees and are enrolled in graduate programs.

Researchers who have studied tuition benefits, including Jaime S. Fall, director of UpSkill America at the Aspen Institute, and Kevin Martin, chief research officer at the Institute for Corporate Productivity, believe that frontline workers might be more likely to participate in these programs if companies moved from “tuition reimbursement” to “tuition assistance” models, where employers pay their portion of education costs upfront. Many lower-income employees—or workers of any kind—can’t afford to float tuition costs for several months while they wait to be reimbursed.

Does free matter?

Walmart, the world’s largest private employer, already followed a tuition-assistance model. But the company had asked participating employees to chip in $1-a-day to cover a small portion of the costs. Its new program is completely free.

No evidence appears to exist on whether free vs. extremely low-cost makes a difference for uptake and graduation in employer benefit programs.

About 28,000 workers currently participate in the program, and 7,000 have graduated since it started in 2018. The pandemic seems to have added new momentum—with the company seeing a 93-percent spike in both high school and college graduates between April 2020 and 2021.

“It is essential to prioritize making postsecondary education accessible and affordable for all, but that is just the start,” says Molly Bashay, a senior policy analyst at the Center for Law and Social Policy (CLASP).

“Like most people, working adults have multiple commitments that compete with going back to school,” she said. “Whether it’s juggling a second job, child care or dependent care, securing reliable transportation, or the simple fact of trying to make ends meet, balancing coursework and work for pay is tricky without help.”

Structure and price

McDonald’s has been an early test case. The company launched its Archways to Opportunity tuition assistance program in 2015, which paid upfront for the full cost of most high school completion and college programs. The program was popular but relatively limited in scale, serving about 5,000 employees and costing only about $7 to $9 million a year. In 2018, that changed—but what made a difference was a shift in eligibility requirements.

Amid changes to the corporate tax structure, McDonald’s decided to allow anyone who had been employed for 90 days—as opposed to the previous nine-month requirement—to participate. The program grew markedly. To date, more than 45,000 McDonald’s employees have received tuition assistance, and another 20,000 have gotten support for non-college programs.

The jump in participation among workers at McDonald’s suggests that how tuition assistance programs are structured may matter as much as the price.

“To ensure equitable adoption of any free tuition programs, we need to encourage providers to consider the life circumstances of working adults,” said Francis. “This means accommodating childcare needs and flexible work schedules, among other services, to allow workers to take advantage of these education benefits.”

Companies should also consider adding non-degree credentials that can be stacked toward a college degree, she said, to add more flexibility to tuition benefit programs and to encourage participation.

Role of the Feds

What to watch: To encourage more businesses to go big with tuition benefits, advocates for years have been pushing for the U.S. Congress to increase the $5,250 annual tax benefit companies get for the educational assistance they provide to each employee, including for help repaying student loans.

Bipartisan proposals would raise the tax benefit to $12,000 and allow it to cover education-related tools and technology, including computers and construction equipment. 

It would be the first increase to the benefit since 1986, when Walmart operated 900 or so U.S. stores. It now has almost 11,000 locations worldwide, with 5,000 in this country.

Does college pay off?

We dive into the latest research on college ROI, including a study released today by Georgetown University’s Center on Education and the Workforce. In short: what students study matters a lot.