Starbucks to partially fund bachelor's degrees for workers

Starbucks says it will pay for its baristas to go to college.

Speaking at an event in New York, Starbucks CEO Howard Schultz unveiled the partnership between the coffee-making giant and Arizona State University (ASU), which will give Starbucks' 135,000 United States employees access to a bachelor’s degree through ASU's online degree program.

The Starbucks College Achievement Plan (CAP) differs from other employer tuition-reimbursement programs in that the coffee chain's workers will not be required to remain with Starbucks after they have completed their degrees.

Many other companies offer some type of college tuition reimbursement or scholarship options, but recipients must agree to work at the company for a set amount of time or face a penalty if they leave.

Any Starbucks employee, full or part-time, who works an average of 20 hours a week and meets the admission requirements at ASU, will be eligible for the program.

Starbucks will give a “partial scholarship” of $6,500 to freshman and sophomore students. Depending on an individual’s financial situation, that scholarship can be combined with need-based financial aid from the university and federal student aid. The program is also open to employees of Starbucks’ other establishments such as Teavana and Seattle’s Best Coffee.

For those who may start as a junior or senior, Starbucks will provide full tuition reimbursement for the last two years of school. The total value of the CAP program is $30,000 for two years of full-time study.

It was not immediately clear if an employee could receive both the partial scholarship and the tuition reimbursement if they pursued their degree from start to finish with this program.

It also is unclear how many employees will apply for the program, and Schultz said he doesn’t know how much the initiative will cost the company. Tuition for an online degree at ASU costs about $10,000 a year, and the school notes most students who pursue an education with the online option finish in less than three years.

Because most workers at Starbucks only make at or slightly above minimum wage, they would likely qualify for a Pell Grant, which could be as high as $5,730 each year.

The company's announcement comes as student loan debt in the U.S. has topped $1.2 trillion, surpassing the amount of credit card debt in the country, and as the cost of a college education has steadily risen faster than inflation. The program presents a major opportunity for workers who often only make between $7 and $10 an hour and have to work multiple jobs to make ends meet.

Schultz reflected on his own upbringing in federally subsidized housing in Brooklyn, and told the audience this was a personal issue for him because he was the first in his family to obtain a college education.

“We as a company want to do something that has not been done before. That is, we want to create access to the American Dream, hope and opportunity for everybody,” Schultz said.

Still the program may have some hurdles to overcome.

“I think it’s going to be interesting to see how this plays out, but I don’t think we should expect that this program alone or programs like this are going to be solutions to our widespread problems in higher education,” said Beth Akers, a fellow at the Brookings Institution’s Brown Center on Education Policy.  

“One of the most striking constraints of the program is that it only allows the workers to get reimbursed for coursework at this single institution — ASU. This is a huge business opportunity for ASU, there will be lots of revenue coming in from all of these students,” said Akers.

“That’s not to say the quality of education will be less for those online students, but that is a legitimate concern and it's something that limits the students' options.”

Because Starbucks is only reimbursing tuition, and the scholarship only covers a portion of the tuition, employees who successfully gain admission will still have to pay part of their education fees upfront.

Online tuition fees at ASU range from $482 to $852 per credit hour, depending on whether a student is in or out of state, fees which are much higher than the national average of $277. For the employees who transfer in with enough credits to be considered juniors or seniors, the full bill will be covered, but for those who start at the lower level the costs may present a challenge.

Mark Kantrowitz, publisher of Edvisors.com, told Marketwatch that the issue of retention could become a problem because online courses tend to have a lower completion rates.

"The main reason for low performance at online programs in general has to do with the setting,” he told MarketWatch. “Not everybody can benefit from an isolated learning experience, without the opportunity to learn from peers and get more hand-holding and the demographics (low-income students are less likely to graduate).”

The program also applies to workers at its 8,200 company-operated locations, but not those employed at any of the 4,500 franchisee-run stores.

The company also plans to phase out its current “Starbucks U” program at the end of 2015 and said in its announcement that the new partnership could “be an option” for employees who are using Starbucks U.

The current program offers up to $1,000 a year in reimbursements at City University of Seattle or Strayer University.