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TheStreet Open House

Is Starbucks Tuition Reimbursement Just the Start?

Stocks in this article: SBUX

NEW YORK (TheStreet) -- When Starbucks announced its "College Achievement Plan" in collaboration with Arizona State University this month, it seemed the coffee giant was set to have a monopoly on ambitious employees. For juniors and seniors in college, the program offers full tuition reimbursement, and for freshmen and sophomores, a partial scholarship.

Even though it sounds generous, the program has its detractors who say Starbucks has simply found a clever way to reduce employee turnover -- if you quit your job while you're in school, you lose all benefits. No matter the motivation, free college tuition will be a significant incentive for many workers, and some experts say it's just a matter of time before other companies try to compete. How far they'll go, however, remains to be seen.

"In business there will always be those who follow, those who lead, and those who stay on the couch," says Adam Levin, founder of Credit.com. "It's in the self-interest of every business that can afford it to do something like this. The more young people are able to get out from under student loans and participate in the economy, the greater the benefit to every business in the economy."

Many companies that follow in Starbucks' footsteps will do so quickly -- possibly within the next six months, predicts Barbara Greenberg, clinical psychologist. Greenberg says that so many companies may develop similar programs, 2014 will be remembered as the year businesses started taking responsibility for workers' education.

"Everyone wants to be part of something exciting, even if it costs them money," she says. "This is how trends are born. One company generates the buzz and appeal and then others follow suit. We're going to see other companies jumping on this bandwagon in an impulsive way."

Starbucks' move is probably already spurring some of its competitors to action, says Bryan Carey, co-founder of Money Saving Parent.

"You can bet that management at competing businesses in food service and related industries have already met, talked about the plan and are presently brainstorming ways to respond," Carey says. "Something as generous as a free degree cannot be ignored, and it won't be taken lightly. I could easily see the day when extra employee perks like free online tuition and other benefits become an industry norm."

While some companies will do exactly what Starbucks did and partner with an online university and develop a tuition plan, others will decide to offer something they hope will be perceived as better than free tuition, such as free health insurance or a more generous 401(k) savings plan, Carey suggests.

In the short term, however, it's tuition reimbursement programs we're going to see more of, says Doug Schade, principal with recruitment firm WinterWyman's software technology search division.

Also see: How to Find Your Passion in a Job You Hate

"Like the beginning of other benefit trends we've seen, i.e., Netflix's unlimited vacation policy announcement having rippling effects throughout the country," Schade says, "I believe there will be a knee-jerk reaction towards greater tuition reimbursement offerings by other companies."

Companies that develop a similar offering may not roll it out nationwide just yet -- they may start by offering it in a smaller market and see how it's received, Levin explains.

"CFOs around the country are doing the bean counting right now to see if a program like this is going to work for them. They're not going to wait and see if this works for Starbucks -- they don't care. Every bottom line is different, and if they like the concept and they have the money, they're going to say, 'Let's do this.'"

While Starbucks' move may inspire companies that are already generous to be more generous, it won't affect companies that don't already have a decent benefits structure in place, says Don Grant, a certified financial planner in Wichita, Kan.

"I believe that more generous, employee-centric companies will always offer more benefits to enhance the lives of their workers," Grant explains. "However, I believe that this will not spread to many more employers who don't already have a history of enhancing their worker's lives with benefits." 
Bottom line, Starbucks is likely to remain the exception, not the rule, Grant says.

"In this employment environment with lots of people looking for jobs, employers just offering 'good' jobs are doing fine in their recruitment efforts," he says, implying that as long as companies still have interested applicants, they've got no incentive to roll out a more impressive benefits package.

With that said, Starbucks isn't the first company to offer tuition assistance, and although they may be doing it "on a grander scale," other companies are making a concerted effort to pay for employees' education and help them pay down student loans, Levin says.

Also see: How to Ask Your Employer to Give Back

"A lot of businesses have begun helping students pay down their loans, which is what is really needed in this country right now -- a little help for the people who are struggling under mountains of debt," Levin says. "Also, many family-owned businesses around the country offer scholarships to kids every year -- they just don't get the media attention."

Of course just because it's been done before doesn't mean that Starbucks' new offering isn't brilliant, Greenberg says.

"They're genius. Consumers worldwide are going to think positively about them -- even if they don't drink coffee. People like to work at companies and support companies that make them feel like part of a family. Starbucks has accomplished that -- Ironically, they're one of the biggest chains in the world, but they've done something that makes them seem like a mom and pop shop that really cares."

Greenberg adds that chain retailers with a history of hiring young workers may be some of the first to start similar programs, highlighting Gap, Urban Outfitters and Abercrombie & Fitch as companies with enough money and enough young employees to make it work.

Whether a company has enough money to make a tuition program successful is the big question, says Tom Gimbel, president and CEO of LaSalle Network, a Chicago staffing firm.

"Starbucks is sitting on about $2.5 billion in cash, so it can afford to offer this type of employee benefit," he says. "Starbucks' CEO Howard Schultz understands that the economy is picking up and that he has to differentiate Starbucks from other retailers out there."

While tuition reimbursement won't necessarily convince someone to leave their current job and go to Starbucks, it will sway someone who is thinking about working at Target or any other retailer to apply for a position at Starbucks, Gimbel says.

"With more applicants, they can be a little more selective in who they hire, whereas other retailers won't necessarily have that opportunity. If this is a success, it could save millions on training and turnover, while attracting higher-level employees. It's a smart investment, but it will take years to determine whether or not it's successful."

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