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3 Drawbacks Of The Starbucks College Achievement Plan

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Following the announcement June 16 by Starbucks (NASDAQ: SBUX) CEO Howard Schultz that the company would pay college tuition for thousands of workers, including those who work as few as 20 hours per week, much was written and said about the program, some of it positive, some negative.

On the positive side, Forbes said, the program would allow many of Starbucks’ 135,000 workers to graduate with a bachelor’s degree debt-free. Full tuition reimbursement would be granted to students with two years of college completed. Enrolling freshman and sophomores would receive subsidies worth an average of $6,500.

Notably, Starbucks said it would not require employees who graduate to stay on at the company. 

Related: Starbucks, ASU Join Forces To Help Employees Graduate - Analyst Blog

Secretary of Education Arne Duncan, who appeared with Schultz when the program was announced, said he believed Schultz was “focused on not just making a profit, but on helping the country and helping the world do better.”

Under the hood, however, the new Starbuck’s program is not all sunshine and rainbows.

Sun Devils Only

For starters, students are not free to enroll in any college or university. The program was designed solely for students willing to ‘attend’ Arizona State University’s online degree program.

Not Very Free

In addition, CNNMoney said, the program is anything but a free ride. A four-year degree, CNNMoney calculated, would cost the average student about $23,000. That’s because for the first two years Arizona State University would provide a scholarship covering 22 percent of tuition. The balance would come out of the pocket of the student or through traditional financial aid.

Starbucks employees who complete their junior and senior years at ASU would get a 44 percent scholarship from ASU with the balance covered by student loans, which Starbucks said it would pay after students complete each semester.

Fine Print

The New York Times pointed to what it called “fine print drawbacks” in the Starbucks program in addition to those mentioned by CNNMoney.

For example, students (or parents) would have to pay much of the cost upfront and could wait months or even years before reimbursement.

Related: Analyst Buzz Heats Up Starbucks Shares

A junior or senior, in order to qualify for full reimbursement, would need to earn 21 credits, out of 120, before reimbursement began.

That feature, according to Starbucks strategy director, Lacey All, was part of a plan to encourage students to complete their studies.

“We want to basically challenge our partners to complete their college degree,” All told The New York Times, “and pay them back each time they complete that 21 credits.”

All countered some of the “pay in advance” criticism by saying that Starbucks would provide some financial aid up front. She also noted that many students would qualify for government tuition assistance and that, at the end of the day, students should not have to pay more than half the full price out of the pocket with most of that covered by university-arranged student loans.

Unique Opportunity

Despite these and other objections, the Starbucks program is unique, especially since it was designed to include part-time 20 hour-per-week employees.

Arizona State’s online program is highly rated and includes 40 majors. Starbucks employees will be able to enroll in the program starting August 15, with online classes starting on October 15.

At the time of this writing, Jim Probasco had no position in any mentioned securities.

Posted-In: Arne Duncan CNNMoney college Howard Schultz New York Times StarbucksWall Street Journal Media Best of Benzinga

 

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