Tuition Benefits Drying Up

More business students receive employer tuition assistance, but fewer employers offer the benefit and fewer still will pick up the whole tab

The MBA sponsorship program at Deloitte impressed Jason Halupnick when he took a job there in 2001. As long as he earned strong performance reviews, he could eventually apply for an expenses-paid degree, courtesy of the firm, at a school of his choice.

But when his turn to apply came in 2003, he says, the process had become more stressful: Unlike prior applicants, he was required to make a formal pitch about the investment potential of his education before a panel of Deloitte's partners.

"The process was parallel to that of actually applying to grad school," he says.

Today's working MBA hopefuls are facing more rigorous selection criteria and tougher odds than the generation before them when it comes to getting an employer to pay their way through school. Research suggests employers have found new ways to make the most of their graduate tuition investments, and avoid being burned by fickle employees who accept the money and leave anyway.

A growing number of prospective students are without the benefit at all. In 2010, 56 percent of employers offered graduate school assistance, down from 69 percent in 2003, according to annual benefits data collected by the Society for Human Resource Management (SHRM). The group's data show an average steady decline in offerings of about 2 percent a year. For companies with 500 employees or more, 75 percent offered the benefit in 2010, down from 80 percent in 2007.

Meanwhile, use of such programs more than doubled between 1992 and 2007, according to a 2010 joint study by SHRM and the National Association of Independent Colleges and Universities (NAICU), with the biggest boost among employees seeking graduate degrees. Thirty-six percent of employees reporting tuition reimbursements in 2007 said they were pursuing a master's degree, vs. 21 percent in 1992. Business was the top area of study reported in the survey, which included management, accounting, finance, marketing, and business administration degrees.

Employee Retention

From their inception, tuition sponsorship programs were expected to improve workers' skill sets and retain talent and foster goodwill, says Colleen Manchester, an assistant professor at the University of Minnesota's Carlson School of Management (Carlson Full-Time MBA Profile), who has written two research papers on the topic.

In 2000, 23 percent of employers offering such programs required graduates to pay back their tuition if they left within a year, according to data from the International Foundation of Employee Benefit Plans. That shot up to 49 percent in 2006. In her research, Manchester concluded that offering tuition assistance alone—without any payback provisions—had only limited success in retaining employees.

There are fewer full sponsorships at business schools now than there ever used to be, says Dave Gent, executive director of the Evening and Weekend MBA program at UC-Berkeley's Haas School of Business (Haas Part-Time MBA Profile).

When the University of Pennsylvania's Wharton School (Wharton Executive MBA Profile) started its executive MBA program in 1975, nearly all candidates had their tuition fully paid by an employer, says Peter Cappelli, a management professor and director of Wharton's Center for Human Resources. Now, less than half the employers agree to pay the full amount, he says.

Other schools are also experiencing a decline, and not just in full sponsorships. In 2010, 28 percent of prospective business students registering on MBA.com said they intended to use employer support to finance their education, down from 33 percent in 2003, according to the Graduate Management Admission Council, the organization that publishes the GMAT.

Companies Reevaluate

One reason tuition reimbursement is on the decline is that employers no longer expect a return on their educational investment. Cappelli says few employers viewed tuition sponsorship as a program where they would see an actual return on their investment following a student's graduation. Most employers saw it as a managed benefit, similar to offering day care or a 401(k) contribution, which could prevent turnover. The most effective programs go one step beyond tuition reimbursement, Cappelli says, matching participants with promotions before graduation to avoid having them leave for another opportunity.

"One of the inherent benefits we receive with the program being in place is that when someone is enrolled in a class, they are not going to be reimbursed until the class ends," says Brant Suddath, director of benefits at Home Depot (HD), adding: "We see it as long- and short-term retention tool."

Berkeley's Gent says the most striking change he's noticed among students receiving tuition assistance is that the amount of reimbursement has become more evenly distributed. "Companies stopped fully sponsoring a few and are sponsoring more employees at a lower dollar level," he says.

The IRS allows students to receive up to $5,250 of tuition assistance from their employers tax-free, and many employers now stay within that limit, the business schools report. In 2007, the average benefit received by master's candidates totaled $3,852, according to the SHRM and NAICU study.

Local Recruits

When Georgia Tech's College of Management (Georgia Tech Part-Time MBA Profile) started a part-time MBA program three years ago, it targeted Home Depot's Atlanta-based corporate headquarters as a place to recruit students, says Paula Wilson, admissions director for the full-time and evening programs.

The school started the evening program at the request of area employees who expressed interest in an MBA but didn't want to leave their jobs for two years, Wilson says.

As tuition assistance has dwindled, schools have increasingly tailored their programs to the needs of students eligible for such aid. Berkeley's Haas draws the majority of its sponsored students from nearby PG&E (PCG), Cisco Systems (CSCO), Chevron (CVX), and Wells Fargo (WFC), Gent says. The school asked area employers which skill sets they needed participants to be most competent in. Out of that effort, Haas now allows students to pursue a company project and have it count toward their class work.

Haas has also helped students negotiate tuition assistance benefits with their employers, in some cases doubling the amount of sponsorship money they receive. At Arizona State University's Carey School of Business (Carey Part-Time MBA Profile), the financial aid office catalogs the reimbursement procedures of area companies in order to advise prospective students on the benefits available to them.

Both schools developed separate career services for those students. The counseling focuses on networking within their companies and identifying internal advancement opportunities.

Marjan Bolmeijer, the owner of Change Leaders, an executive coaching company, counsels employees who enter their companies' "high potential" or leadership development programs, many of which make them eligible for sponsorship packages. She suggests all recipients determine their employer's motivation for offering the money, which could potentially help them make a case to receive more.

Whether it's asking for more tuition money or free time to attend classes, reimbursement deals are negotiable, she says.

Zlomek is a reporter for Bloomberg Businessweek.