By Craig Maloney, CEO, InStride and Ehsan Zaffar, Professor, Founder and Executive Director, The Difference Engine at Arizona State University
Companies are at a crossroads in determining how to achieve their diversity, equity, and inclusion goals while complying with anticipated restrictions on affirmative action-type programs. As companies explore strategies that still achieve DEI outcomes, offering financial help to all employees in the form of tuition reimbursement when they pursue their education has come into focus.
Tuition reimbursement sounds like it provides equal opportunities for career advancement to employees from all backgrounds.
The truth is the usual way of reimbursing tuition doesn’t fix the current unfairness or make sure that everyone has equal access to education and career growth. Fortunately, new programs where the employer offers to fund most or all the tuition upfront and offers education options directly from high-quality universities can help bridge the racial wealth gap by eliminating the two main barriers to using employer-provided education benefits: floating the upfront tuition costs and the complexity of navigating the education system.
Who benefits from tuition reimbursement?
Tuition reimbursement is an enticing offer for employees: seek out education that will advance your career and your company will pay you back for some or all of the expenses. Even though this is a valuable benefit for some employees, rates of participation remain shockingly low, with an average of only 2% of eligible employees taking advantage of it. Research shows that one significant obstacle to participation is the financial burden of covering these costs while awaiting reimbursement—a hurdle that falls unfairly on employees from lower socioeconomic backgrounds.
Considering that upfront tuition costs reach into the thousands of dollars, many employees are simply priced out of participating. In 2022, the Federal Reserve’s 2022 Survey of Household Economics and Decisionmaking found that 37% of U.S. adults couldn’t afford an unexpected expense of $400, let alone thousands in tuition expenses.
A recent analysis of the U.S. Department of Education’s National Postsecondary Student Aid Study shows that tuition reimbursement programs are not utilized enough by the student groups they aim to benefit. Tuition reimbursement is disproportionately utilized by White students over Black and Hispanic students, by middle- and higher-income students over lower-income students, and by students pursuing bachelor’s and master’s degrees over those at earlier stages in their educational journey, including those pursuing certificates and associate’s degrees.
This last point suggests that tuition reimbursement programs fall short of serving employees who are earlier in their academic careers, and highlights a failure to meet the growing demand from both businesses and employees for skill-focused courses and certifications.
Education at a greater cost
Overall, tuition reimbursement’s limitations reflect long-standing inequities in our education system. Students tend to seek higher education as a means of attaining economic mobility, only to encounter a system that requires taking on considerable debt. For example, a recent report shows that holding student loans is significantly associated with lower wealth and home equity, particularly for Black borrowers. According to that same report, Black borrowers still owe 95% of their cumulative borrowing total two decades after starting college.
For many students, funding an education can also mean piecing together support, with 26% of adult learners relying on four or more funding sources. It is a reality many entry-level and low-wage workers face as they seek corporate education to advance into careers that require college degrees.
A new horizon: upfront tuition assistance
Companies must recognize that tuition reimbursement programs alone are not leveling the playing field. Fortunately, there is a more equitable way to unlock career- and life-changing education: include upfront tuition assistance. This is accomplished through direct-billing relationships with academic programs instead of (or alongside) a traditional tuition reimbursement benefit. Both program types involve the employer covering tuition costs as part of an employee’s benefit packages, but one offers superior equity outcomes.
Upfront tuition assistance benefit programs remove the need for employees to cover initial tuition costs and simplify the steps needed to find and enroll in career-advancing education programs. By enabling companies to directly pay educational institutions for their employee’s tuition, these programs facilitate broader access to education and boost participation rates across all demographic groups, particularly underrepresented employees.
Based on data from companies that partner with InStride to deliver upfront tuition assistance programs through this direct-bill model, removing the initial financial barrier significantly increases the overall employee participation rate from the 2% average for traditional tuition reimbursement programs up to 7%. These programs typically also see higher utilization rates from non-white employees and women, sometimes at double their relative share of an employer’s workforce.
These are dramatic differences compared to traditional tuition reimbursement programs and shouldn’t come as a surprise. Research on Universal Basic Income programs, which similarly remove upfront barriers, such as work requirements, to access aid, demonstrates that individuals use the funds to invest in themselves, their families, and their communities, not to shirk work. Upfront tuition reimbursement similarly relies on trusting recipients to take their academic studies without punitive clawbacks or grade requirements hanging over them. Research has shown that students with aid from employers tend to earn higher grades than others, but there is no consensus that upfront tuition coverage would dampen the high levels of performance working adults achieve in the classroom.
This approach offers tangible benefits for companies, too. Research, including insights from applied tools like Arizona State University’s Women’s Power and Influence Index, demonstrates that organizations with a more diverse workforce consistently outperform those with less diversity across all levels. By improving employee access to higher education and professional development opportunities, direct-bill academic programs help companies upskill and retain critical workers while meeting key DEI goals. This, in turn, leads to a more skilled, motivated, and resilient workforce.
For companies that believe in education benefits, offering a tuition reimbursement program alone is not leveling the playing field, but small changes to these programs are possible and easy to implement.
Seizing the moment for a fairer future
The shift from exclusive tuition reimbursement to direct-bill programs represents both a strategic and moral imperative for Corporate America. This change in approach can help companies ensure that opportunities for growth are equally accessible to employees of diverse backgrounds, paving the way for a more inclusive and equitable future.
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About the Authors
Craig Maloney is the CEO of workforce education solutions provider InStride. Craig is a seasoned leader with a proven track record of achieving profitable growth and creating shareholder value. He has extensive experience in the benefits and healthcare space and deep domain expertise in SaaS and tech-enabled services. Before joining InStride, Craig held executive leadership positions at Maestro Health (CEO), Benefitfocus (EVP), Hewitt Associates (Divisional CEO), and Aon / Univers (President / COO), where the focus was on growth programs and value-based solutions across SaaS and tech-enabled service models.
Ehsan Zaffar is an educator, civil rights lawyer and founder of The Difference Engine, an ASU Center on the Future of Equality. As ASU’s “Chief Difference Engineer” Ehsan works with some of the brightest students and thoughtful faculty and staff in the country to craft real-world solutions to some of our nation’s most daunting problems. Prior to his work at Arizona State University, he served as a Senior Advisor on Civil Rights to the Secretary of Homeland Security during the Obama Administration. He is the founder of the Los Angeles Mobile Legal Aid Clinic (LAMLAC) which helped pioneer the delivery of mobile legal care to vulnerable populations in California and across the nation. He serves on the board of ACLU California, as well as Team Rubicon, the country’s pre-eminent disaster relief organization and is a member of the Council on Foreign Relations and Royal Institute of International Affairs.