Tacos and Tuition: A look at new college benefits for the low-wage workforce

Tacos and tuition? Burgers for bachelor’s degrees? It’s very possible if you work at Chipotle or McDonald’s, two companies that announced college tuition benefits for their workers in the last decade.

Employer-sponsored education assistance is not a new perk. Tax benefits to employers offering education assistance programs have been available under Section §127 of the federal tax code since 1978, allowing employers to annually deduct from their taxable gross income up to $5,250 in education assistance per employee, covering costs like tuition, fees, and books.

However, these provisions were only temporarily renewed every five years until the Obama administration made them permanent in the tax code in 2012. An update in the One Big Beautiful Bill Act (OBBBA) makes the $5,250 benefit inflation-adjusted starting in 2026. Employers can also continue to offer tax-free student loan repayment assistance under a §127-qualified educational assistance program, a provision now made permanent under OBBBA.

Expansion of tuition benefit programs following tax code reform

Education assistance has typically been a privilege for the managerial/executive class, yet in new research, I documented the expansion of these education assistance programs to the low-wage workforce. Focusing on the 50 largest low-wage employers, most of which employ workers in the fast food and retail industries, none had what I call a corporate-sponsored tuition benefit program (CSTB) for their frontline, non-executive workers prior to the 2012 tax code change. Yet, 22 introduced one between 2012 and 2024. At the time of writing, these 22 employers included companies like Starbucks, Target, and Dollar General, and collectively employed over 4.5 million workers in over 100,000 locations.

Although the study doesn’t identify exactly why these corporations began to extend education benefits to low-wage employees after 2012, some social and economic trends provide a clue. CSTBs may be a strategy to recruit and retain workers in a growing and increasingly competitive low-wage labor market. Research shows corporations that offer tuition assistance programs have lower employee turnover and higher employee performance ratings among program participants. Higher retention rates save money, with some corporations reporting a savings of $2 to $3 per dollar spent on tuition benefits.

CSTBs also may reflect shifting priorities in corporate social responsibility. In 2014, when former Starbucks CEO Howard Schulz announced the Starbucks College Achievement Program, the stated intention was to address the rising cost of college and growing burden of student loan debt. Given dramatic declines in public support of higher education following the 2008 recession, the advent of private supports through CSTBs might be an important—but underappreciated—element of providing college access to those for whom college has been increasingly out of reach. Nonetheless, there are tradeoffs that come with private sponsorship of college benefits since employers can dictate higher education pathways and possibilities. My new study investigates these tensions by exploring the design features of CSTB programs and implications for college access.

College for the low-wage workforce

First, it is important to recognize that CSTBs could be a boon for the nation’s estimated 53 million low-wage workers. According to a 2019 Brookings report, low-wage workers are individuals earning less than two-thirds of the median full-time male worker wage. At the time, this corresponded to a median hourly wage of $10.22 and annual median earnings of $17,950. More recent analyses define low-wage workers as those making below $17 an hour, following both increases in inflation and hourly wage rates during the pandemic. Low-wage workers comprise 44% of the total workforce and are composed of a diverse group of adults working mostly in part-time service jobs in the fast-food and retail industries.

Seventy-seven percent of low-wage workers have not completed a college degree, but CSTBs might make this more attainable. If an employer offered the maximum tax-free assistance of $5,250, that’s more than the average published full-time tuition and fees at a two-year college ($4,050). And reports indicate that these benefits are being used: Walmart reports over 126,000 associates have participated in Live Better U, and the Starbucks College Achievement Program boasts that it has helped over 16,000 employees earn college degrees since its 2014 launch.

Program design

As a higher education policy researcher, I know that the design of college access programs has implications for student outcomes. In the new study, I compiled and compared the characteristics of the 22 CSTB programs adopted among the nations’ 50 largest low-wage employers. I found eligibility, benefit structures, and performance requirements looked very different across employers. For example, of the 22 programs, half extended benefits to new employees on their first day of work. About one-third were only accessible to full-time employees. Eleven programs emphasized “debt-free” college, covering 100% of costs in select programs, while others capped benefits at various levels (e.g., McDonald’s Archways to Opportunity is capped at $2,500 for part-time employees).

Given that employers typically offer education benefits to upskill and retain employees, it is no surprise that about 70% of the CSTBs in the sample restricted the degree programs and fields in which students could enroll (e.g., business and management programs). Some also had strings attached—about one-fourth of programs articulated employee performance requirements, and 40% had academic performance requirements. Roughly 60% of programs required students to enroll in online programs, but all of these were exclusive partnerships with specific institutions of higher education, including some for-profit institutions. Notably, over 75% of CSTBs were offered in partnership with third-party providers, including education technology companies such as Pearson or Guild Education, who provide a platform for employees to access college programs.

Using a qualitative method for typology analysis, I found that the CSTBs developed since 2012 for low-wage workers fell into three types of models. The programs in each category below are not uniform, but they share common features. Ordered from the most to least restrictive, the three categories are:

• Employer-Centered CSTB, “Upskilling and Retaining Full-Time Workers”: These CSTBs were restricted to full-time employees and used the tuition reimbursement model, where students pay upfront and later get reimbursed for educational costs. These are primarily beneficial to the employer who seeks to retain and upskill full-time employees but can be very costly and potentially discouraging to employees who wish to participate (n=7).
• Employer-Designed CSTB, “College, our way”: These CSTBs were offered to full- and part-time employees. The company sponsored college enrollment upfront but restricted students to online-only programs and typically had restrictions on institutions and degree programs in which students could enroll (e.g., supporting specific training) (n=12). These programs offer opportunities for upskilling to part-time employees in areas that will ultimately serve the employer.
• Student-Centered CSTB, “Supporting college enrollment choices”: These CSTBs were offered to full- and part-time employees, and there were few restrictions on instructional modality and eligible degree programs (e.g., permitting general training vs. skill-specific training) (n=3). These are the most student-centered because they offer the most choice to students while also being accessible to most employees.

This variation across CSTBs reflects the inherent tensions in offering education assistance programs. While some employers have significant restrictions on who is eligible (e.g., part- vs. full-time; duration of employment) and what they are eligible for (e.g., two-year vs. four-year degrees; general vs. specific skills training), others appear to be more flexible and offer employees more choice in how and where benefits will be used.

These choices in program design underscore the somewhat conflicting goals of CSTBs: They are employee retention and development programs with the goal of meeting the corporate bottom line and, at the same time, a government-backed approach that has the goal of improving educational attainment and social mobility for American workers.

Understanding the broader impacts of CSTBs

The CSTBs for low-wage workers examined here proliferated during a time when college costs and affordability, free college, student loan debt relief, and the value of college were central topics in national discourse. The phenomenon invites scholarship that examines how and why private corporations are stepping in where public investment has fallen short. The findings also raise another important question about federal policy design: Are federal tax benefits for employer-sponsored education assistance the best way to meet national college attainment goals?

Another outstanding question is whether the distinctive approaches to CSTBs lead to different employee and student outcomes. Many “College Our Way” programs partnered with for-profit colleges, which are potentially more accessible for low-wage workers but have low completion rates and have been described as predatory. If CSTBs induce employees to enroll in low-quality programs and employees have to pay additional costs beyond those covered by their employer, enrollment could leave employees worse off. Research should continue to study CSTBs and investigate their impact on educational opportunity and outcomes, long-term career trajectories and socioeconomic mobility, and overall quality of life for low-wage workers, including non-pecuniary outcomes.

However they are packaged, these education assistance programs have the potential to significantly expand college access and promote college success for millions of Americans, particularly those in the low-wage workforce. Yet, we should recognize that about 60% of the largest low-wage employers did not introduce a CSTB at all despite federal tax exemptions. We should also simultaneously consider how significant shifts in the low-wage labor market due to changes in the minimum wage, increasing automation, changing consumer culture, and closures of several retailers and chains are affecting not only employment opportunities, but now also access to higher education for individuals at the margin of college and low-wage work.

Corporate tuition benefits are a growing but understudied source of private investment in education and workforce development. In these endeavors, perhaps the corporate business world can learn something about what works for students, and the education world can learn something about supporting the diversity of college students, including working college students.