Two Major Payment Pitfalls to Avoid When Designing Education Benefits

Education benefits programs can be a powerful talent strategy. At their best, they attract top talent, increase retention, and drive meaningful employee development when aligned with career mobility. Plus, they are a chance to do good, empowering employees who want and need that career growth.

That is practically the definition of “win-win.” And yet…

As with many things that sound great on paper, the vision doesn’t always square with reality. From fire prevention initiatives (remember Smokey the Bear?) that ended up fueling raging mega-fires, to highway expansion projects that caused even worse traffic, the history of good intentions is riddled with unintended consequences. 

Take tuition reimbursement programs. 

In the course of our research, we found an example of a common tuition reimbursement program and the outcomes the company realized. This employer offered the benefit but did not take an intentional approach, and the average employee accrued $5 in debt for every $1 of reimbursement. What’s more, fewer than 20% earned a degree within six years. In the end, 84% of employees ended up having a more negative view of their employer because the existing education benefits program created a poor experience. 

Read that again: 84%. This program was a commonly used strategy meant to create a better experience for both employers and employees, and it ended up undermining the empowerment and support they were trying to build.

It’s worth noting that organizations who offer tuition reimbursement are attempting to provide a program that promotes meaningful employee development and education opportunities: 

  • They’re covering full tuition
  • They’re creating opportunities for growth
  • They’re encouraging accountability to ensure a good ROI

When these well-intentioned programs lead to lackluster outcomes, it’s worth asking why

So what is actually going on here? It’s not that employers aren’t trying hard enough to create great education benefits. They’re putting in plenty of thought and care.

The real problem is two blind spots that can undermine even the most promising education initiatives.

Blind Spot #1: Tuition Reimbursement 

The first blind spot is tuition reimbursement. Wait—that’s much better than no education benefit at all, right? But remember, one company found that 84% of employees actually held the company in lower regard for it.

Here’s why: When a company offers tuition reimbursement, employees have to pay for everything themselves first and wait to be reimbursed later. This may be doable for higher-salaried employees in corporate roles — but ask a frontline worker to pay thousands of dollars in tuition up front, especially when over a quarter of Americans struggle to pay their monthly bills, and it’s understandable that they’ll pass.

This is where good intentions get tangled up in reality. Instead, consider offering direct tuition payment up front, without asking employees to step into a financial hole just to get the skills they’ll need to dig themselves out. Better yet, explore day one tuition-free programs to drive enrollment, employee engagement, and retention.

Guild research has found that when offered a tuition-free program instead of tuition reimbursement, the increase in enrollment was 3X higher for households with a median income below $30k relative to those in households of $50k+.

That brings us to a larger point: Tuition reimbursement is unintentionally inequitable

Instead of creating more opportunities, it pushes education further out of reach for many frontline workers. Our research shows that 49% of employees cite the inability to pay a tuition bill upfront as one of the main reasons for low program uptake*

This represents a huge missed opportunity for everyone. First, employees can’t get the education and skilling they want and need, and second, employers can’t find or develop people for key roles. 

The front line remains a largely untapped resource, and employers are competing to attract this critical population in the face of growing talent and skill gaps. Debt-free education and skilling programs offer a more sustainable and fruitful way to approach these challenges.

Blind Spot #2: Voucher-Based Payments

What’s better than tuition reimbursement? A program that’s directly funded by employers so employees never pay out of pocket.

But there’s a catch. Direct payment is one thing, but the most effective programs remove both the financial burden and the administrative burden from employees.

Not all direct payment systems are created equal, especially voucher-based payments. This structure does seem promising: directly and fully funded by the employer, vouchers enable adult learners to enroll in programs without paying up front or taking on additional debt. That is the baseline of an equitable and effective program

But vouchers aren’t a particularly good solution. Here’s where they fall short. 

Although education expenses are fully covered, employees often have to run a gauntlet of paperwork to actually access funds. There is also a chance that they’ll be on the hook for thousands of dollars in tuition fees if a single step in the administrative process is missed. That in itself may be a powerful disincentive:

According to Guild research, 32% of employees cannot afford the additional cost of education beyond what their employer pays*.

There’s another reason we don’t recommend vouchers to employers: You can’t track how well they work.

Companies who use voucher-based payments have no way of tracking which programs employees register for, completion rates, retention rates from various career pathways, or how (or if) employees are progressing in their programs. How can you really know that your investment is paying off and track ROI with a voucher payment system? The truth is, you can’t. 

So if tuition reimbursement isn’t effective, and vouchers don’t deliver optimal value either, where do we go from here? The key is a strategic approach that supports your valued employees with accessible opportunity, facilitates business growth, and offers visible, data driven ROI. 

A Better Way Forward

Walmart and Chipotle were among the early innovators asking many of these questions years ago. They noticed that standard tuition reimbursement programs were doing the opposite of what was intended, so they set out to change that. 

Our Guide to Making Education Your Competitive Advantage reveals how they did it, and spotlights eight best practices to help you optimize your own employee education program.

Inside, you’ll learn…

  • Why 86% of employees engaged in a Guild program are more likely to refer others to their employer
  • Why retention rates are 34% higher for learners in Guild programs
  • Why projected graduation rates are 53% higher than the national average for Guild’s part-time bachelors degree students

Most importantly, you’ll learn how to achieve the same kind of success. Ready to move beyond your blind spots? Get our Guide to Making Education Your Competitive Advantage and get started. 


*Guild survey taken of employees across 52 companies of varying industries from Dec 2020 – Jan 2021.

Written by Chloe Rittenhouse

Senior Principal, Employer Solutions

Passionate about empowering mission driven organizations striving to solve the world's most difficult challenges. Chloe helps employer partners strategically design education benefits programs and policies that empower career mobility for their workforces.

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