Companies around the world are increasing their employer-based education assistance budget in a bid to attract and retain top talent and also to create a more capable and knowledgeable workforce.
The trend is especially noticeable in the US, where 61% of companies offer financial assistance for employee education and talent development, according to the GMAC 2018 Corporate Recruiters Survey report. Among those firms, two in three, or 66%, have increased their budgets for employee education and talent development compared with five years ago. Fewer than half of Asia Pacific (43%), European (44%), and Latin American (46%) companies offer education assistance, but the majority of those who do have increased their budget compared with five years ago, GMAC said.
Companies significantly curtailed their employer education assistance programmes after the financial crisis of 2008-09. The latest figures, however, reinforce the upward trend that started in 2014 when the labour market showed signs of improvement and employers slowly resumed offering such benefits again. A vibrant labour market tends to prod companies to set up various education assistance schemes in order to boost the loyalty of their employees, help them live up to their potential and also increase their expertise and qualifications.
Lydia Jilek, director of Voluntary Benefits for Willis Towers Watson, told talentculture.com that some companies go as far as to offer programmes to pay for the tuition of employees’ children. In addition, companies such as EY and Boston Consulting Group offer unlimited tuition reimbursement.
Damian Koshnick, a lecturer at Northern Arizona University (US), wrote in a piece for techwhirl.com that: “Some businesses call this “talent investment” and use it as a means of creating a more specialised and knowledgeable workforce.”
Against the background of growing costs for graduate degrees, these benefits prove a useful tool for attracting the millennial generation of employees, but they are also associated with some risks. Since we live in an age of increased employee mobility, there is the possibility that a newly acquired degree and an improved skillset may encourage employees to look around for other professional opportunities. To reduce this risk, employers therefore often include clauses requiring employees to pay back some of the assistance if they decide to leave the company before a specified point in time.
Looking beyond traditional funding options
Faced with the necessity to pay for their education, Masters students tend to focus on the usual funding options - student loans, scholarships, grants and fellowships. However, they often forget that there are other funding options, including the educational assistance programmes offered by employers.
Read: Masters Funding Options: How Do They Differ?
Tuition assistance is the most common form of employer-based educational assistance. Some companies offer tuition reimbursement as part of their benefits package. An employer may agree to cover the partial or full cost of the employee’s tuition. It usually works like this: employees pay upfront for their tuition fees and once the class or semester is complete, employers pay back a portion or the full amount of the fees.
Student loan repayment, which is another form of employer-based educational assistance, has gained popularity over the last years. The GMAC 2018 Corporate Recruiters Survey report found that 9% of US companies currently offer it as a part of their overall benefits package.
Lightening the load of student loan debt
It’s easy to understand why student loan repayment assistance options are so appealing to students if we take a look at the numbers. The typical student borrower in the US will take out USD 6,600 in a single year, averaging USD 22,000 in debt by graduation, according to the National Center for Education Statistics. Student-loan debt has been growing relentlessly over the past two decades. It amounted to USD 1.4 trillion nationwide as of the end of 2017, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit.
Read: Education Loans for Your Masters Studies Abroad
Companies have started to realise that they can become a more attractive place to work if they help employees lift the burden of student debt. About 76% of respondents said that if a prospective employer offered a student loan repayment programme, they would be much more likely to take the job, according to the 2015 American Student Assistance survey.
Under loan repayment assistance programmes, the employer contributes a certain amount per month toward the loan as a benefit on top of the salary. For instance, financial services provider Fidelity, offers employees at the manager level and below up to USD 2,000 per year or up to USD 10,000 in total towards repayment of their student loans. Accounting and consulting firm PricewaterhouseCoopers (PwC) offers associates and senior associates up to USD 1,200 per year or up to USD 7,200 in total towards repayment of student loans.
It appears that employer education assistance will further gain in popularity as millennials and members of Generation Z are entering the workforce en masse and employers are utilising strategies to attract them. This is good news for students facing the rising cost of education and employers needing a more competent and loyal workforce.