Starbucks is teaming up with Arizona State University on an exclusive program that could send thousands of its baristas, store managers, and other employees to ASU Online for their undergraduate degrees, with the coffee company picking up about three-quarters of the tuition tab.
The unusual program, the Starbucks College Achievement Plan, will be available to more than 100,000 of its employees. The partnership, which could cost Starbucks hundreds of millions of dollars a year, is likely to add luster to the company’s reputation for corporate social responsibility. It could also be a welcome enrollment jolt to ASU Online, which has about 10,000 distance-education students and aspires to enroll 10 times that many.
Howard Schultz, chairman and chief executive of Starbucks, and President Michael M. Crow of Arizona State, along with the U.S. secretary of education, Arne Duncan, are scheduled to announce the new program on Monday in New York.
In an interview with The Chronicle before the announcement, Mr. Schultz said providing educational benefits "with no strings attached" was an extension of the company’s culture and values. Employees will not have to commit to remain at the company past graduation, he said, but he expects the new benefit will actually lower attrition and attract new people. He said it would also demonstrate "the role and responsibility of a public company" at a time when education matters and "so many people are being left behind."
Mr. Crow, who calls the fast-growing Arizona State a "New American University" model—a research institution designed to be expansive, not exclusive—said the Starbucks partnership responds to national needs for raising educational levels while also paying broader benefits. "We can help the corporation, we can help the person, we can help the country," he said. "Imagine if 200 corporations were doing this. Or if 500 corporations were doing this."
New Model for Higher Education
The partnership could serve as an example not just for companies but for higher education, Mr. Crow added. "Everyone says we need new models," he said, and this is one alternative. "If it’s all about state legislatures appropriating more money, guess again."
Starbucks expects the scholarships, coupled with student aid from government sources and from Arizona State, to cover about half the costs of tuition for freshmen and sophomores. The scholarships, which will be awarded through the financial-aid office, will be more generous for juniors and seniors, covering the full costs of tuition not covered by financial aid, to encourage them to complete their degrees.
ASU Online offers 40 undergraduate degrees at prices ranging from $482 to $543 per credit. The company says it expects to spend an average of $6,500 per student over two years for freshmen and sophomores, and another $6,500 per student over two years for juniors and seniors, plus however much it needs to cover any other unmet tuition costs for the upperclassmen.
Clichés about liberal-arts graduates working as baristas aside, Starbucks says only about a quarter of its 135,000 employees in the United States have a bachelor’s degree, and about 70 percent say they are either now attending college or aspire to.
Starbucks, which calls its employees "partners" and has been celebrated for offering generous benefits even to those who work as little as 20 hours a week on average, says it expects this educational benefit could eventually cost as much as it now spends on employee insurance ($254-million last year) or its "Bean Stock," its stock-options plans ($234-million last year). For the quarter ending on March 31, the company, with 20,000 stores worldwide, reported revenue of nearly $3.9-billion.
About 80 percent of the employees are benefit-eligible and therefore would also be able to use the scholarships, if they qualified for admission to Arizona State.
For some students the tuition benefits will exceed the $5,250-a-year mark after which the benefit becomes subject to federal income tax, but the company says that won’t be the case for the "vast majority" of its employees.
For the past three years Starbucks has offered its employees discounted education benefits at the private nonprofit City University of Seattle and the for-profit Strayer University, at a total cost of about $6.5-million. Laurel Harper, a company spokeswoman, said that with the advent of the new scholarship program, it would be ending those other programs except for students currently enrolled.
Mr. Schultz came to know Mr. Crow four years ago after speaking at Arizona State, and cemented the friendship during the past 18 months while they worked together on a Markle Foundation project on restoring the hope of the American dream. He said he was impressed by Mr. Crow and by the university’s innovative character.
Mr. Schultz is also the founder of Maveron, a private-equity firm that was an early and major investor in the company that runs the for-profit, all-online Capella University. Why not work with that institution? "We thought we needed the legitimacy of not only an online university but one that also had a long history," he said, adding, "that’s no knock on Capella."
Ms. Harper said the company had considered other institutions but kept coming back to Arizona State because of its academic reputation and its ability to serve students on a large scale with its own faculty members.
Mr. Crow said that the content, design, and delivery of the ASU Online programs were all controlled by the same research-qualified university faculty members who teach the 70,000 "immersion" students enrolled on the university’s three main campuses, and that the operation could handle the influx of new students without compromising quality. It’s "not just some kind of diploma mill or factory," he said. "Ours is a teaching, learning, discovery model."
Mr. Crow said the university expected as many as 15,000 new students as a result of the new partnership. Other deals in this vein, however, haven’t always proved to be as momentous as first expected. Four years ago, for example, Wal-Mart announced an arrangement with the for-profit American Public University. It helped boost enrollments there, said Trace Urdan, a senior analyst with Wells Fargo Bank, but not to the extent that many predicted. "We all expected gi-normous things that never happened," he said.
Correction (6/16/2014, 6:07 p.m.): Because of incorrect information provided by Starbucks, this article originally stated that only full-time students would be eligible for the scholarship program. This afternoon Starbucks corrected the information, and this article has been updated accordingly.