The scholarship portion of a new education program Starbucks is offering to help workers pay for an online degree consists entirely of a discount from Arizona State University and not money from the chain.
The Seattle-based company this week unveiled a benefit that is designed to let college juniors and seniors earn a degree from ASU at no cost. For the freshman and sophomores years, workers would pay a reduced tuition. Workers who are admitted to ASU could pick from 40 degree programs, and wouldn't be required to stay with Starbucks after they earned their degrees.
A major aspect of the program is an upfront scholarship Starbucks said is an investment between itself and Arizona State University. When asked how much of that scholarship portion the company is providing, Starbucks initially said financial terms weren't being disclosed.
Following the announcement, however, Arizona State University President Michael Crow told The Chronicle of Higher Education that Starbucks is not contributing any money toward the scholarship portion. Instead, Arizona State will essentially charge workers less than the sticker price for online tuition.
Starbucks said Thursday that the scholarship is a reduced tuition rate. It estimates the reduction in tuition would average about $6,500 over two years to cover tuition of $30,000.
To cover the remainder in the freshman and sophomore years, workers would apply for federal aid, such as Pell grants, and pay for the rest either out of pocket or by taking out loans. Starbucks would bear no costs in those years.
For the junior and senior years, Starbucks would reimburse workers for whatever tuition they had to cover either upfront or through loans, once they completed 21 credits.
Matt Ryan, chief strategy officer for Starbucks, said on Thursday that for a worker's junior and senior years, the company could potentially cover up to 58 percent of the tuition, in cases where workers didn't qualify for grants.
If workers did qualify for grants, he said Starbucks could be responsible for very little, if anything. He noted that workers financial situations can vary greatly.
Laurel Harper, a Starbucks spokeswoman, said previously that the company's analysis with ASU found most of its workers would qualify for federal Pell grants.
A representative for Arizona State wasn't immediately available for comment.
The program, which has been widely praised because education benefits are rare for low-wage workers, brought attention to the struggles people face in paying for college. It is unusual because workers can pick from 40 different degree programs and aren't required to stay with Starbucks after they complete their degrees.
It's not clear how much the program will end up costing Starbucks. But Ryan said the company expects that it will "for sure" be a much bigger investment than its current tuition reimbursement program, which will be phased out by 2015.
That program offers up to $1,000 a year to take classes at City University of Seattle or Strayer University, with no limit on the number of years they can apply. Since it was rolled out in October 2011, Starbucks said the program has cost it $6.5 million.
Mark Kantrowitz, publisher of EdVisors.com, a website about paying for college, said the program could benefit all parties involved.
Workers could get a chance at a degree from Arizona State University at a reduced rate. Arizona State could get a revenue boost from federal aid and out-of-pocket costs workers and Starbucks later pays. And Starbucks could attract a better pool of workers and burnish its corporate image.
Starbucks said its workers are "embracing this benefit with overwhelming excitement; ASU has seen an enormous uptick in interest."