Employee turnover costs you more than you think. The average company spends 16-20% of an employee's annual salary just to replace them. In service industries, the problem gets worse. The restaurant sector saw 72.5% of workers leave their jobs in 2017.
Some companies found a solution that works. They pay for their employees to go to college.
What Tuition Reimbursement Actually Delivers
Tuition reimbursement does what the name suggests. Companies cover some or all of the cost when employees pursue degrees, certificates, or other educational programs. The newer approach, tuition assistance, pays upfront instead of making employees wait for reimbursement checks.
The retention numbers tell the story. At Chipotle, employees enrolled in education programs showed an 89% retention rate after just five months. That's nearly double the rate of employees who didn't participate. When Walmart employees participate in education benefits, they leave at a rate four times lower than non-participants.
The Starbucks Model: 26,000 Enrolled and Counting
Starbucks launched its College Achievement Plan in 2014, partnering with Arizona State University to offer full tuition coverage for bachelor's degrees. The program started with tuition reimbursement but switched to upfront payment in 2021.
Impressive results show up in the data. Right now, 26,000 Starbucks employees are enrolled in the program. About 85% of company stores have at least one employee in the program, and the company celebrated its 10,000th graduate in December 2022.
Starbucks employees can work just 20 hours per week to qualify. They pick from over 100 majors. No commitment to stay at the company after graduation. No payback requirements.
Mary Dixon, director of the program, noted that 20% of participating baristas are first-generation college students. Angela Batista started working at Starbucks when she was 16 and homeless. College had never been in her plans. Now, at 38, she has a degree.
The Financials Make Sense
Companies see returns that justify the investment. Cigna generated $1.29 for every dollar spent on education reimbursement. At Discover Financial, the ROI hit $1.44, with call center employees showing $2.73 in savings per dollar spent.
Guild Education found that companies offering education benefits see retention rates double compared to companies without these programs. Frontline employees in Guild programs are 7.5 times more likely to move into management roles.
The tax benefits help too. Employers can deduct up to $5,250 per employee per year. Employees don't pay taxes on that amount either.
More Companies Making the Switch
Walmart invested nearly $1 billion over five years in its Live Better U program. All 1.5 million U.S. employees get access to free college tuition through 10 partner schools. The company saw increases in both retention and promotion rates after launching the program.
Target followed with debt-free education available on day one of employment. The company covers up to $5,250 per year for undergraduate programs and up to $10,000 for master's degrees. They partnered with 40 schools offering 250 programs.
Chipotle redesigned its program in 2016 to pay tuition upfront. Employees with less than six months of tenure who participate are 2.1 times more likely to stay. The company found that program participants are 3.5 times more likely to be retained and 7.5 times more likely to reach management positions.
At Chipotle, five out of 11 regional vice presidents started as frontline workers. Field leaders who came up through the program now oversee business segments averaging $24 million in annual sales.
Why Assistance Beats Reimbursement
The shift from reimbursement to assistance matters for frontline workers. Traditional reimbursement requires employees to pay upfront and wait months for payback. That doesn't work when 62% of Americans have less than $1,000 in savings.
Rachel Carlson, CEO of Guild Education, explained the problem: "Tuition reimbursement requires the employee to take out-of-pocket dollars, use them to go get educated, and then get reimbursed after the fact. And that works really well when you have more than $300 in your bank account".
When companies pay tuition directly, participation jumps. Three out of four employees without undergraduate degrees choose tuition assistance over reimbursement when both options exist. For employees with no college experience, that number rises to nine out of ten.
Setting Up a Program That Works
Start by picking the right payment model. Direct payment works better than reimbursement for hourly workers. Target and Walmart both pay schools directly to eliminate the upfront cost barrier.
Choose schools that serve diverse populations. Arizona State University, Starbucks' partner, already had strong support systems for non-traditional students. The school offers the Pat Tillman Veterans Center and Yellow Ribbon program for military students.
Set reasonable work requirements. Starbucks requires 20 hours per week. Chipotle asks for 15 hours per week after 120 days of employment. Both thresholds let employees balance work and school.
Support students beyond just paying tuition. Starbucks assigns each participant an enrollment coach, financial aid counselor, and academic advisor. These support systems matter. Students with coaching are more likely to complete their degrees.
Track your outcomes. Most companies don't measure the ROI of education benefits. Only two out of five have systems in place to track results. You need data on retention, promotion rates, and time to fill positions to understand what's working.
What This Means for Communication
Education benefits only reduce turnover if employees know about them and can use them easily. Survey data show that while 80% of working adults want to go to school, only 40% know their employer offers tuition assistance. Just 2% of eligible employees actually participate in traditional programs.
Taco Bell saw 98% retention over six months among employees participating in its education program through Guild Education. Clear communication about the benefit made the difference.
Getting program information to shift workers requires tools they actually use. Mobile-first platforms work better than email for frontline teams. The same goes for application processes. Amazon makes education benefits available to employees after just three months and handles applications through their internal system.
The Bottom Line
Tuition programs reduce the turnover rate because they change the math for employees. The choice between staying at a company that will pay for college and leaving for a job that won't is pretty straightforward.
The data backs this up across industries. An 89% retention rate at Chipotle for program participants. Four times lower turnover at Walmart. Double the retention rates across companies offering education benefits. These aren't small improvements.
Companies get employees who stick around longer and move up faster. Employees get degrees without debt. Both sides win.
The question isn't whether tuition assistance works. The numbers already answered that. The question is whether your company can afford to keep losing people who would have stayed if you'd helped them get ahead.
