Recognizing the stress involved in saving for college, employers are finding ways to pitch in.
Rosemarie Maher was in a quandary. A single mom of two smart kids, she was at a loss when it came to figuring out how she was going to finance their college educations. Painfully aware of the increasingly prohibitive cost of college, Maher would lie awake at night wondering how she was ever going to be able to help her children fulfill their dreams.
Then Maher went to work for New York-based clothing giant Phillips-Van Heusen Corp. During orientation, she was thrilled to learn the company offered a non-competitive scholarship program that was open to the children of any full-time employees who had been with the company at least one year. The requirements were minimal -- the student in question merely had to be college age and attending an accredited school. While the award only pays $1,500 per year, Maher, who currently works as a manager in charge of the global administration of credit cards in the company's Bridgewater, N.J., office, says "every little bit helps."
PVH is far from the only company extending education-related benefits to its employees' children. According to the Society for Human Resource Management's 2011 Employee Benefits Survey, 15 percent of employers offer scholarships and 2 percent offer educational loans for members of employees' families. Twelve percent offer 529 plans, tax-advantaged savings plans designed to spur saving for future college costs.
Just one look at the skyrocketing cost of college tuition makes it painfully obvious why employees with children are stressing out about it. According to the College Board's 2011 Trends in College Pricing Report, annual tuition rates at in-state public universities increased by 8 percent last year, to an average of $8,244. The cost of living and studying at a typical private university rose by 4 percent to $38,589, while public two-year college tuition jumped an average of 9 percent, to $2,963.
Given that the cost of higher education will only continue to go up, say experts, companies that find ways of easing the burden on employees struggling to help their kids pay for college will reap rewards in the form of better engagement, energy and productivity.
Sweetening the Pot
PVH does more than just offer scholarships. Recognizing that its employees and their college-bound children need far greater assistance, the company has enlisted the services of College Coach, a Watertown, Mass.-based division of Bright Horizons Family Solutions that advises clients on the college admissions and finance process. Each year, PVH brings in representatives of College Coach for on-site seminars that are typically "filled to capacity," says Mary Kazan, PVH's senior vice president of corporate benefits and compensation. Employees can also sign up for one-on-one counseling sessions with former deans of financial aid and for phone-based counseling.
Maher took advantage of both programs, helping her daughter Cristina and son Scott find a host of ways to finance their educations. Both children received PVH Scholarships and relied on phone conferences with College Coach counselors to help them identify additional scholarships, grants and federal aid. In particular, Maher says, she was especially grateful for their assistance in completing the Free Application for Federal Student Aid, which requires detailed information on family finances. Today, Cristina holds a bachelor's degree in equine studies from Centenary College in nearby Hackettstown, N.J. She plans to go back to school to earn her master's degree in special education. Scott is in his fourth year at Rutgers, studying nutritional sciences.
Columbus, Ohio-based Franklin International, a privately held manufacturer of adhesives and sealants, offers a subsidized 529 plan to its employees. Seeking to encourage workers to take personal responsibility for financing their kids' educations, Franklin devised a matching program in which the company contributes 25 percent of what the employee saves to a maximum of $250 per child, per year, for up to two children per family. If employees put $1,000 into their child's account, for example, the company adds $250, bringing the yearly total to $1,250.
According to Manager of Compensation and Benefits Doug Reys, the program is a real retention booster because the longer employees stay with the company, the more funds they are able to rack up for their kids' educations. Employees who work for Franklin from the time their children are born until they reach the age of 19, for example, are eligible for $5,000 in matching funds.
The value of $5,000 in "free money" didn't escape Susan Ballinger, an analytical chemist who has worked for Franklin since 1999. She and her husband had already been contributing to a 529 plan on behalf of their two sons when the company launched the subsidized program in 2007. When her sons are old enough, she also plans to take advantage of Franklin's College Textbook Program, which reimburses employees for half of the cost of their children's textbooks to a maximum of $500 per year. Each year of service with the company equals one quarter's worth of textbook reimbursement.
This year, only five employees have submitted for textbook reimbursement. Reys blames the low participation rate on the fact that parents have to obtain receipts from their children in order to request the reimbursement. However, 10 percent of Franklin's workforce -- 30 percent of employees with children of the appropriate age -- participate in the 529 program. The cost to the company is just $10,000 a year, which Reys characterizes as a "drop in the bucket" when compared to what the company gets back in the form of increased retention, engagement and productivity.
While he doesn't have any specific numbers to share, Reys' department often hears anecdotes of how much the benefits mean to individuals. In particular, he points to a chemical engineer -- admittedly a "hot commodity" -- who told HR that the recruiter who placed him at Franklin called one week later to offer him a supposedly better opportunity. In declining the opportunity, the engineer's response was, "Would they help put my kids through college? This company will do that."
The downturn in the economy, coupled with rapidly increasing tuition costs, has caused business to skyrocket at Wayne, Pa.-based First Benefits, developers of The College Tuition Benefit, a program that lets employers provide SAGE College Scholarships to employees' children, grandchildren, nieces, and nephews at little or no cost to the company. (SAGE stands for Student Achievement Guided by Experience; SAGE Scholarships are intended for low-income, high-achieving students.)
Employers participate in one of two ways -- either by paying a nominal fee (typically $10 or less per employee, per year) or, more commonly, through third party providers such as National Enrollment Systems or Colonial Life, which offer the benefit free of charge as an incentive for employees to purchase additional products from them.
The program can be constructed in a number of different ways. Some companies like to tie it to their 401(k) defined-contribution retirement benefit as a means of encouraging people to save for retirement and for their kids' college education. In these instances, an employee will receive tuition reward points equal to 5 percent of their retirement account balance each year. According to Michael Ackerman,
First Benefits' president, companies typically experience a 13-percent increase in 401(k) participation when they add The College Tuition Benefit to the mix.
Other companies opt for a Birthday Plan, which rewards employees' children on their birthdays with 500 to 1,000 points each year, depending on their age. Each point equals $1 in college tuition.
If program participants in the program leave a company before their children go to college, their tuition reward points are frozen at their current level. Should they accept employment with another company that offers the program, they can begin adding to their balance once again.
The scholarship money comes from a network of 292 private colleges across 45 states. They benefit from their participation in the form of access to a database of 235,000 high-school students to whom they can market their institutions.
The program's maximum reward is one year's tuition, per child, to be spread over four years at one of those 292 schools. Six-hundred employers currently participate in the program, with another 50 to 60 signing on each month, according to Ackerman. He believes that number would be much higher were it not for a sense of disbelief among both employers and employees.
"They feel it's too good to be true," says Ackerman. Even when it's explained to HR leaders at potential clients that the program is free of charge, many remain reluctant to sign up, he adds.
Learning and Working
Not all college-assistance benefits are targeted to parents. Some employers have developed tuition assistance and scholarship programs aimed at young, college-bound employees.
Atlanta-based United Parcel Service Inc., for example, operates the Earn and Learn program, which gives eligible employees the opportunity to earn $3,000 per calendar year, with a lifetime maximum of $15,000, to be used for college tuition and expenses. Part-time supervisors are eligible to earn $4,000 per year, with a lifetime maximum of $20,000. In 2011, UPS provided more than $17.5 million in tuition support to 14,764 students.
Admittedly a "recruitment tool," Earn and Learn is available in areas where UPS struggles to find enough workers for its facilities, says John McDevitt, senior vice president of human resources and labor relations. Currently, 90 UPS locations participate in the program.
Typically, these are large processing facilities, or "hubs," located near urban centers with large populations. UPS partners with local colleges and universities that help them recruit students to come work at the hub.
Students are allowed to select a work schedule that best fits with their class schedule. In exchange, they receive tuition assistance to be used at one of the participating schools, as well as a regular paycheck.
At hubs where labor is most in demand, benefits to student workers are even greater. In Chicago, for example, students who work at UPS' Chicago Area Consolidation Hub are eligible to have most of their tuition and textbook expenses paid for. They also receive a housing allowance and transportation to and from work. At the UPS Worldport in Louisville, Ky., where the Earn and Learn program was launched as Metro College in 1998, 100 percent of student-workers' tuition is paid -- half by UPS and half through tuition tax credits from the state.
Since the program was launched, retention at the UPS Worldport has grown from a dismal 45 percent to 92 percent among students and 61 percent among non-students. According to McDevitt, the program has helped UPS achieve its goal of "retention and a stable workforce."
"Earn and Learn has enabled us to help our student-workers to advance their education, their career development and opportunity, while benefitting UPS in terms of a stronger pool of applicants and better retention rates," he says.
See these charts that illustrate a wide disparity between the tuition prices charged by private colleges and universities and their public counterparts.