(Bloomberg Business) — Two years ago, Starann Freitas had no college degree. “I’d always wanted one, but life responsibilities got in the way,” says Freitas, 52. She worked as an administrative assistant for health insurer Anthem Inc., answering phone calls and scheduling meetings.
Eight months later, that had changed. Freitas enrolled in an online associate’s degree program at Southern New Hampshire University’s College for America in May 2013 and graduated the following spring. With her degree, she was promoted to corporate communications specialist. “My supervisor sat me down,” Freitas says, “and said it was time for me to move on and use my skills in a better position.” The cost of her degree: nothing. Anthem picked up the tab.
This week, Anthem, one of the largest health insurance companies in the U.S., announced it would expand the pilot program through which Freitas got her degree. The company will pay for all employees who work at least 20 hours a week and have at least six months at the company to get an associate’s or bachelor’s degree from Southern New Hampshire University, which runs an online program called College for America.
Anthem becomes the third large U.S. company to announce a similar investment in their employees’ educations: Starbucks, which has partnered with the University of Arizona’s online program, said in April that it would cover four years of tuition for its employees, an expansion of a two-year free tuition program it announced in June 2014.
Last month, Fiat Chrysler Automobiles said it would roll out its own college tuition program for dealership employees through Strayer University, a for-profit institution that offers courses online.
In theory, programs like this are a win for both employer and employee. Companies end up with a more skilled workforce and promising employees it can promote (cheaper than recruiting and training new hires), and workers gain credentials that might help them move up. “Our goal is to keep enhancing the skills of our associates so we can help them grow and develop their careers,” says Jose Tomas, executive vice president and chief human resources officer of Anthem.
More than half of Anthem’s 55,000 employees don’t have a college degree, says company spokeswoman Gene Rodriguez. Anthem hopes that as more employees take advantage of the free tuition, the company will have a broader pool of internal talent to tap into when it looks to fill positions.
Tuition reimbursement programs have been hailed as a sort of stepping stone to the American dream for the front-line workers they target. “Our typical student is 40 years old, slightly more likely to be a woman, slightly more likely to be a minority, and most likely didn’t have parents who attended college,” says Colin Van Ostern, chief marketing officer of College for America. On its website, Starbucks offers vignettes of many such workers earning their degrees — like Tammie Lopez, a barista who left college after her father lost his job during the recession, and Michael Bojorquez, the son of Mexican immigrants. With data suggesting the growth in job opportunities for college-educated workers is outpacing that for low-skill workers, some experts suggest the bachelor’s degree is the route to a middle-class life.
Climbing up a company’s ranks, however, is rarely as simple a matter as earning a degree (which presents its own challenges). While companies can promise free tuition, they can’t guarantee a promotion, or higher salary, after graduating. Companies also can’t be sure newly graduated employees won’t leave, diploma in hand, for other jobs. (Starbucks, for instance, says it doesn’t require workers to commit to staying at the company after graduating.)
Tony Carnevale, director of the Georgetown University Center on Education and the Workforce, says that’s a risk that companies that offer tuition reimbursement programs are likely well aware of. ”This is one way for Starbucks and other companies that compete for a large pool of front-facing workers to go above and beyond, and to attract the cream of the crop,” Carnevale says.
Companies also take on another risk, one endemic to online education: That workers will drop out before they finish. Although it’s too early to measure meaningful retention rates for Starbucks, Chrysler, and Anthem, online education programs have long struggled to boost completion rates.
Even so, Julian Alssid, chief workplace strategist at College for America, thinks demand for companies financing workers’ degrees is likely to grow. With the unemployment rate dropping, employers are finding “the labor market is tightening, and it’s getting harder to attract and retain qualified workers,” he says.
“Companies are really stepping up and treating advancing their employees’ education as a key corporate undertaking — not just something to do to be nice.”