The news that Starbucks (NASDAQ:SBUX) is now offering its employees the opportunity to pursue an online bachelor's degree at no cost has been met with accolades, with even a U.S. Congressman voicing his support and praising the company's offer of a "free online education".
It didn't take long, however, for the readers of fine print to point out that the word "free" is a bit of a misnomer. Additionally, the strong inference that the company itself would be paying the tab for employee degrees was also revealed to be quite overblown, with Starbucks claiming "full tuition reimbursement" that is actually a discount package provided by Arizona State University, its collaborative partner.
So, is the Starbucks College Achievement Plan a wonderful new employee benefit, or a public relations campaign? In my opinion, it's both – and here's why.
Limitations are many
The program's restrictions were outed very quickly by the Chronicle of Higher Education, which had interviewed CEO Howard Schultz and ASU President Michael Crow on June 15, one day prior to the program's official announcement. During the interview, Schultz noted that the college plan could cost the company "hundreds of millions of dollars a year".
Two days later, the Chronicle revisited the issue, with additional input from ASU's Crow. The "automatic, up-front scholarship" that Starbuck's Q&A webpage addresses doesn't come from the company, but is being provided by the university. Juniors and seniors would receive $2,420 per semester, while lowerclassmen will get only $1,267. Starbucks has pledged to make up the difference in costs for upperclassmen only; freshman and sophomores can apply for aid, including student loans.
Why the big disparity in benefits? The program is actually geared toward finishing a degree, rather than beginning one. This introduces another limiting factor for the program's participants: Employees with partial degrees will have far fewer degree choices open to them than those just starting out. For some, this may mean that, despite the 40 degree options ASU offers, they might not qualify at all.
A new option in the realm of higher educations
Although Starbucks has said that about 100,000 of its workers will be eligible for the plan, the actual number of participants will likely be between 4,000 and 12,000 for the first year, according to ASU's Online Dean Phil Regier.
If 8,000 upperclassmen enrolled in the fall, the plan would cost ASU about $384 million each year, and Starbucks $176 million, based on Crow's estimates. Eventually, Regier believes that as many as 20,000 workers may take advantage of the program.
These numbers are not trifling, nor are the investments by both Starbucks and ASU. For the latter's part, Crow notes that the program is well worth the university's time and effort, and that the school will still make a profit.
As for Starbucks, the fanfare surrounding the announcement makes it clear that the company expected kudos for the plan. The program's launch on June 16 in New York followed Schultz's ringing of the opening bell at the NASDAQ in Times Square, and featured his and Crow's participation, as well as that of U.S. Education Secretary Arne Duncan.
Despite the spotlight-hogging, Starbucks is doing its workers a good turn – even with the program's limitations. Though there seemed to be some confusion at the beginning regarding the up-front tuition remission policy, Starbuck's investment, even by ASU's estimates, will truly be in the hundreds of millions each year.
With the costs of higher education becoming more and more burdensome, having another option -- despite its limitations – helps to increase available choices. It also expands our concept of what a college education should provide: knowledge and training that spurs upward mobility, without imparting onerous debt on its participants. For that last part alone, both Starbucks and ASU deserve praise.
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Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.