To attract and retain workers in today’s tight labor market, the largest employers in the United States have turned to promoting college tuition and education benefits. In 2021, Amazon announced a plan to revamp its college benefit program, with perhaps the most impactful feature being that Amazon will directly pay its contracted education providers rather than requiring its employees to request a reimbursement after paying out of their own pockets. Amazon’s announcement follows on the heels of other large corporations announcing similar college access initiatives, including Target and Walmart. If done right, not only will these companies improve their employee retention, but also they potentially will benefit from a more educated, engaged, and productive workforce.
Historically, employee education benefit programs have been haphazardly administered. In typical programs, an employee is given a list of schools from which they can choose to attend and then receive a tuition reimbursement. This model presents a major barrier to access, especially for workers making minimum and near-minimum wages. Further, the lists that employers circulate may drive students to low-quality, predatory, and for-profit programs, because they create the impression that the schools have been validated or are valued by the employer.
Direct tuition payment programs like the ones recently offered by Amazon and Walmart are generally a net positive in the education benefit world, because they absolve the employee from the burden of having to pay up front for courses and then seek reimbursement. However, the role of middleman companies that act as agents between employers and schools in providing tuition benefit programs also raises questions about possible conflicts of interest, and what those conflicts may ultimately mean for employee-students.
The Devil Is In the Details
Several years ago, shifts in the way employers provided tuition benefits appeared to favor students, such as in the high-profile arrangement between Starbucks and Arizona State University Online. But as with most things, the devil is in the details. In some of these arrangements between employers and schools, students must pay tuition costs up front and request reimbursement from their employer, which means cash-strapped low-wage workers have little hope of using the benefit. In others, the education benefit is structured as last-dollar funding, which means the employer covers costs that remain after grants and scholarships are accounted for. Education benefits structured in this way require prospective students to first complete the Free Application for Federal Student Aid and use federal funding sources for which they qualify, such as Pell Grants, before receiving the employer-provided portion of funds. This structure improves the employer’s bottom line and its reputation, by lowering the real cost to the employer to fund the benefit and allowing the company to look good for providing it in the first place. However, some employee-students may find last-dollar funding programs have a net negative impact from a college access and affordability standpoint, because they are forced to dip into their federal grant sources, which are distributed in a very limited scope. The tuition benefit structure that most favors the employee is one where they are not required to make any up-front payments or take on any debt to enroll in courses, and where the paperwork required for taking advantage of the benefit is minimal.
Guild Education Emerges as a Major Player
One of the most active companies in the tuition benefits space is Guild Education, founded in 2015 with the goal of acting as an intermediary between employers and their education providers. Guild’s model of tuition benefit provision is appealing because it allows employees to use their employer-provided education benefits without many of the cost and complexity barriers detailed above, as Guild manages a lot of the paperwork as well as the tuition payments made by the employer to the education provider. Guild currently provides this service to some of the largest corporations in the United States, serving as a benefit manager, communicating tuition benefit programs to employees and facilitating tuition payments between employers and schools. Guild’s corporate clients include companies such as Walmart, Lowe’s, Walt Disney, Chipotle, and Macy’s, among others.
Guild also makes arrangements with a wide range of educational institutions, offering them an efficiency proposition that is hard to turn down: providing schools access to a massive network of tuition-backed students, which in theory should slash the amount the school needs to spend on recruitment to fill open seats in their online courses. Schools that Guild has contracts with include online giants such as Purdue University Global (formerly known as Kaplan University), University of Massachusetts Global (formerly known as Brandman University), and Southern New Hampshire University, as well as more traditional universities such as Morehouse College and University of Arizona, who offer online programs that are run by third-party online program management companies.
The Century Foundation first got a glimpse into Guild’s work when we came across contracts between the company and some public universities as part of our research on online program management companies (OPMs). Guild’s leadership rejects the OPM label for the company, because it does not involve itself in the development or delivery of online coursework at its client institutions. However, colleges pay Guild a tuition share, and some of its services listed in its contracts with colleges are similar to those offered by OPMs, including providing guidance to students through the application and enrollment process. Also, similar to OPMs, some of Guild’s contractual arrangements with universities rely on an exception to the federal ban on incentive compensation payments. For its service to schools in filling seats, Guild keeps a portion of the tuition revenue. Revenue-sharing with companies that recruit students is typically banned by federal law, because of the incentive it sets up to use high-pressure sales tactics. In the contracts acquired by The Century Foundation where that information is not redacted, it was revealed that Guild receives a range of 23 percent to 50 percent of tuition revenue from some of the public colleges with whom it has contracts.
In short, Guild connects employees with the educational programs their employers have approved and chosen from Guild’s curated “marketplace” of programs, and then facilitates the tuition payment between the employer and the education provider. Guild has helped to create a more seamless sign-up system for employers and their employees, increasing the likelihood employees will use their benefits in the first place. However, in addition to Guild’s revenue-sharing arrangements, there is another important downside to consider: to achieve efficiencies (and thus make higher profits), the Guild model of facilitating and gatekeeping education benefits narrows the number of options given to students.
Guild presents education options to its corporate clients and guides them in selecting programs that will meet the goals they have in offering tuition benefits. Employees therefore will get only a limited set of choices from the start—those that Guild presents to the employer as possible options. The options that Guild presents to its corporate clients may all be perfectly adequate courses to achieve the workforce education goals that employers are seeking. But, because Guild also has revenue-sharing agreements with its education-provider clients, it does have an incentive to promote particular programs at institutions from which it receives a larger share of the tuition revenue, which may encourage it to choose higher profits over higher quality. For its part, Guild says it only presents programs that have a track record of mobility-related outcomes for students, though some of its contracted education providers have abysmally low track records or are seeking to fill the virtual classes in their outsourced programs, so advocates await evidence. Guild’s employees who shepherd prospective students through the enrollment process do not individually represent specific programs in the company’s educational client list and instead present options irrespective of the effect on Guild’s bottom line. This structure differentiates Guild from traditional online program management companies, and the company believes this right-sides the incentives that would otherwise exist because it shares tuition revenue with its education clients.
Guild’s potential value-add to the education benefit world is apparent: it has the capability to assist employers with providing their employees with high-quality education options without burdening these time-and-resource-starved prospective students with up front costs and tons of paperwork. It sounds like a winning combination—but in the end, the winners in this model are determined by whose needs are being met first: those of Guild, its corporate clients, its education providers, or employee-students.
And yet, the need for the type of service that Guild provides is clear. There is likely no satisfactorily efficient way for a corporation on its own to offer its employees a full set of high-quality education choices while also having the system set up to make direct payments to any and all of the schools an employee-student might want to attend. Moreover, under such a scenario, time-starved employees would still be left to themselves to navigate a burdensome college enrollment process. Guild’s ability to provide a menu of educational options and facilitate direct payment on behalf of the student is where the company could focus its energy to do the most good, since this is the key barrier to employee uptake in typical benefit programs.
Protect Workers’ Most Valuable Resource: Their Time
Guild’s involvement in education benefits has taken the critical first step of keeping low-paid workers from having to pay tuition out of pocket. However, employees of companies such as Walmart, Target, and Macy’s become Guild students the moment they decide to investigate their tuition benefits, and these workers-turned-prospective-students are at risk of having their time and federal aid dollars wasted until Guild’s practices as an intermediary change.
Offering tuition-free and debt-free education and training opportunities to frontline workers is great. But those who are holding down full time jobs—especially physically demanding jobs—may not be in the best position to enroll in school. The promise of flexibly doing school work on your own time sounds good, but unfortunately a key resource many people lack is time. The typical frontline worker works more than forty hours a week and has caregiving responsibilities outside of their job(s). A just and equitable employee tuition benefit program for frontline workers should consider the clock hours involved with engaging in coursework and accommodate for that investment.
Another aspect of time for which frontline workers deserve careful consideration is in where they spend their time away from work and how much value they gain from the experience; that is, Guild shouldn’t waste their employee-students’ time by letting them attend schools that might not present good value. Walmart employees have education options from Guild that include large online universities, some of which have their own track records of predatory marketing and recruitment. For example, Purdue University Global (PUG) and Southern New Hampshire University (SNHU) feature prominently as options for most of Guild’s corporate clients’ employees. Purdue Global was previously known as Kaplan University, and still receives its services from the for-profit education company, Kaplan Inc. Southern New Hampshire on the other hand has always been a nonprofit institution, but its massive online sector operates vastly differently from its historically small campus. SNHU leadership has been open about its prioritization of marketing and recruiting operations, and its balance sheet puts it more on par with for-profit colleges. Unsurprisingly, PUG and SNHU look alike in terms of inputs and results. Purdue Global spends just 20 cents on instruction for every dollar it collects in tuition revenue, Southern New Hampshire spends 16 cents per dollar, and both schools’ graduates struggle to repay their student loans.
Guild recently added new education providers to its marketplace, including Morehouse and Spelman Colleges, though the programs that will be offered from these institutions are actually run by other for-profit, third parties that manage online programs under the brand of traditional, well-recognized institutions. Morehouse programs offered through Guild will be those that are managed by embattled for-profit education company, 2U, while Spelman’s online programs are managed by a company called Collegis. Universities turn to companies like 2U and Collegis to create, manage, and most importantly, recruit for their online programs. Not all outsourced online programs are problematic, though it is increasingly apparent that universities need to do more to safeguard their resources and reputations, as well as their students and prospective students. Outsourced programs like these are set up around an exception to a federal ban on paying commissions to student recruiters. This fact alone means prospective students are at risk of encountering pressurized sales tactics when speaking to enrollment advisors. Coupled with the fact that Guild also gets a cut of the tuition revenue for filling seats at some already-outsourced programs, the value that frontline workers get from attending a program may be the last thing considered by those who see a return on their involvement first.
Who Really Benefits?
Tuition benefit programs garner positive press for corporations that pay employees so low that they must rely on public assistance to make ends meet. In a similar vein, Walmart now garners headlines for covering one-hundred percent of employee tuition costs. In reality, Walmart employee-students who are eligible for the Pell Grant will exhaust their Pell dollars first, and Walmart then steps in to cover remaining costs. Reliance on federal grants and aid first underscores the extent to which Walmart leaves employees to rely on public resources when the company could instead contribute a fairer share.
Corporations should be transparent about the details of their education benefits. Under the status quo, employees can be drawn to job openings because of a list of benefits only to find their particular shift or location assignment doesn’t qualify them at all, or the wait period to access the benefits is prohibitive. Likewise, frontline workers—many of whom have no prior experience navigating a postsecondary education market that thrives on information asymmetries—may not have time to do research or read the fine print. Some may be surprised to learn that if they leave their job or get terminated for any reason, they’ll be on the hook for the cost of the tuition that was paid on their behalf.
If the supposed labor shortage has taught corporations one thing over the past six months, it should be that frontline workers’ options matter. If an education benefit doesn’t actually deliver something valuable and meaningful to employees, it won’t get used, and therefore might not be a good worker retention tool over the long term.
Editor’s Note: This commentary was revised on February 10, 2022, to reflect changes Chipotle made to its tuition benefit policy.