Paying Their Workers' College Tuition Can Pay Off for Companies

Companies that pay for some of their employees’ college degrees or certificate programs can recoup that money and then some, according to a study released today.

The study focused on the big health insurer Cigna and found that for every dollar it spent on its educational reimbursement program, it got back $1 and saved another $1.29 through reduced employee turnover and lower recruiting costs.

The study was conducted by Accenture and funded by Lumina Foundation, a nonprofit concentrating on higher education. This is the first in a series of studies Lumina has planned to evaluate employer tuition reimbursement programs and ultimately recommend best practices.

Tuition reimbursement is a longtime employee benefit at many major corporations. But the programs have seen a renewed sense of interest recently, in part due to new high-profile relationships between individual colleges and employers, the rising price of higher education, the necessity of a post-secondary degree for most good jobs, and the difficulty employers say they have in finding qualified workers.

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More than 60% of employers offer some form of tuition assistance, according to EdAssist's Annual Review of Employer Tuition Assistance Programs. And there are roughly 1 million students currently receiving some level of employer support. That represents about 20% of all students over the age of 40, Jamie Merisotis, CEO of Lumina, noted in call with reporters Friday.

That said, there’s relatively little known about how effective tuition assistance programs are—both from employers’ perspective of improving and retaining their workforce and from employees’ perspective in terms of earning a degree and qualifying for a better job.

“It’s important for us to look under the hood and get a better understanding of what the return on these investments might be,” Merisotis said.

Employees who participated in Cigna's program were 10% more likely to be promoted, 8% more likely to stay with the company, and 7.5% more like to transfer within the company than employees who didn't use the tuition reimbursement. Participants also saw a 43% increase in wages over a three-year period.

It’s difficult to say how much those results can be extrapolated to other programs, though, because of the wide variation in design.

In most cases, employees can receive up to $5,250 for undergraduate programs or $8,000 for graduate programs; any benefit beyond that is taxed as additional income. A few programs, such as Fiat Chrysler's, don't require employees to pay up front and wait to be reimbursed, which eases the financial pressure on them. In some cases, employees can be reimbursed for attending any accredited college, which gives them more power to choose one that will best serve their interests. But single partnerships are growing more common, with that model followed by Fiat Chrysler, Starbucks, Anthem Blue Cross and Blue Shield, and most recently Jet Blue.

For now, Lumina won't recommend one model over another, Merisotis says.

At Cigna, employees are free to choose their course of study and the school they attend. But they’ll get a better deal if they enroll at one of the 35 or so colleges that Cigna has partnered with, which range from traditional four-year colleges to online for-profit schools, says Karen Kocher, chief learning officer at Cigna. Those schools have discount agreements with Cigna, and they also allow employees to pay their tuition bills after the course ends and they've received their reimbursement money. Based on feedback from employee interviews and a survey, Cigna also recently started an advising service so that employees can get input on what to study, where, and how they can use that knowledge to further their career.

On average, 5% of employees participate in company tuition assistance programs. Cigna falls roughly in that range, with a 5.8% participation rate for its roughly 35,000 employees. The company hasn't tracked how many of those participants go on to earn a certificate or degree, but Kocher said it plans to start.