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The Caffeine High Subsides
The Starbucks-ASU Education Plan is a Good Deal

Starbucks announced recently, to much fanfare, that it will offer free online education for employees via Arizona State. Since the applause died down, however, it has received some criticism, especially for the way the company has scheduled the reimbursements it will pay students.

As Inside Higher Ed writes, the plan is designed to encourage employees with some college education to complete their degrees:

Juniors and seniors will get 58 percent of their tuition reimbursed, as well as fees for financial aid, technology and retention coaching, the latter of which is $5 per credit hour. Should they receive federal grants, military education benefits or need-based aid, the reimbursed amount will be lower.

To keep juniors and seniors on track to graduate, the contract notes that Starbucks will reimburse only those credits attempted in the previous 18 months. Since students will only be reimbursed for reaching “coursework milestones” — in other words, completing 21 credit hours — they either have to keep up with their studies or pay the full cost.

One credit hour at Arizona State University Online usually costs between $480 and $543. That means students have to find a way to cover at least $10,000 in tuition costs — a figure that doesn’t include course materials — over an 18-month period before Starbucks reimburses them.

First- and second-year students aren’t eligible for reimbursements from the company, though ASU will offer them smaller scholarships. 

As critics of the plan have noted, this arrangement puts a significant burden on students. Taking on about $10,000 worth of expenses up front, and only receiving reimbursements 18 months afterward (if not later), is no small commitment. However, Starbucks has good reason to delay the reimbursements for 18 months or more; if students have all their costs paid up front, or after only three or four months, they might work at Starbucks only for that short period of time. Starbucks isn’t compelling employees to stay on at the company after they finish their degree; but it is interested in ensuring that they stay on for a while as they do.

We agree with the verdict of the Wall Street Journal:

The plan doesn’t attack the root causes of rising education costs—those would be federal subsidies that encourage colleges to raise prices—but it’s an admirable attempt at a work-around. One side benefit is to encourage kids to stick with the coffee chain while they pursue degrees. Mr. Schultz reports that turnover among Starbucks baristas is close to 100% per year, which believe it or not is good for the retail and restaurant industry. The CEO reports that peer companies see average annual turnover of 350%.

Even with the steep up-front costs, this plan is likely to help students earn degrees that they couldn’t otherwise afford. In return, the company may attract more dedicated workers, and keep them around for longer than the usual year or less. Arizona State, which seems to be paying the bulk of the expenses, gets to link its name to one of the most high-profile brands in the world.

It isn’t a perfect plan, and certainly doesn’t do anything to solve the real problem in the higher education system: runaway costs. But as deals go, it appears to be profitable for all parties involved.

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