Illustration: Jovana Mugoša for Bloomberg Markets

How to Get Rich Sending Low-Income Workers to College

Guild Education's 33-year-old founder and her socially conscious VCs are poised to reap billions from the tuition assistance startup. Will it pay off for employees at Walmart, Chipotle, and Disney?

One afternoon in September, Rachel Carlson ­welcomed new hires to her fast-growing company, a darling of Silicon Valley. Her latest acolytes were, like her, young and idealistic, with elite credentials from Boston College, Oberlin, and other schools. They listened from a grid of Zoom screens as Carlson outlined the company’s mission: harnessing the riches of corporate America to lift low-income workers into the middle class.

Carlson co-founded Guild Education Inc. six years ago, when she was in her 20s and fresh out of Stanford. At the company’s Denver headquarters, she made her pitch with the zeal of a pioneer marveling at the untapped resources in some newly discovered land. “There is genius in the poorest ZIP codes in America,” she told the employees. “There is brilliance in the most rural places you’ve never been.”

The now-33-year-old chief executive officer has sold this vision to Chipotle Mexican Grill, Lowe’s, Target, Walmart, Walt Disney, and other companies. They’ve hired Guild to manage benefits programs that pay for employees’ education. On its face, Guild’s business model helps everyone. The companies attract and retain employees—an urgent mission in today’s tight labor market. Guild produces a menu of online programs and funnels students to schools eager to boost enrollment. And the workers get a free or heavily discounted education, along with guidance from Guild’s staff of life coaches.

Guild CEO Rachel Carlson on a 2019 <i>Forbes</i> cover.
Guild CEO Rachel Carlson on a 2019 Forbes cover.

Guild is a public benefit corporation, a hybrid that attempts to do well and do good. Guild does well by keeping as much as a third of the tuition dollars for itself. In other words, the more students it signs up, the more money it makes. The company has become a favorite of impact investors, the socially responsible set that has devoted more than $700 billion to companies aligned with their missions. Guild’s marquee venture capital investors include General Catalyst and Bessemer Venture Partners, as well as perhaps the world’s most prominent impact investor: billionaire Laurene Powell Jobs, widow of Apple Inc.’s co-founder, who runs an investment and philanthropy company called the Emerson Collective.

Last spring VCs invested an additional $150 million in Guild, valuing the company at $3.75 billion. Analysts anticipate an initial public offering, perhaps soon. Forbes magazine has put Carlson on its cover, celebrating her as the latest wunderkind with a billion-dollar company, a socially conscious CEO who is now worth an estimated $500 million on paper. Carlson is a “wildly inspiring leader who’s on a mission to change the world,” says Byron Deeter, a partner at Bessemer. “She’s got a tremendous pull to do social good.”

But a closer look shows Guild has struggled to fulfill its idealistic goals, according to interviews with more than 30 current and former employees and a review of hundreds of pages of internal emails, contracts, Slack messages, and company presentations. At times its coaches have had to manage as many as 1,000 students apiece, making it impossible to offer meaningful guidance. The University of Florida, one of its earliest partners, complained that Guild sent unqualified students. And though many of the frontline workers who signed up have praised the service—Guild says its internal surveys show strong satisfaction rates—some complain they were directed toward courses that offered a subpar education.

Within Guild, Carlson has confronted conflicts over race and class, the kind of equity issues she’s so passionate about addressing through education. Guild’s workforce and leadership, including Carlson, are mostly White, and many have privileged backgrounds; they’re reaching out to low-­income workers, many of whom are people of color. Last year a Black vice president left the company after telling colleagues that Guild’s leadership wasn’t taking her input seriously.

Featured in the Dec./Jan. issue of <i>Bloomberg Markets.</i>
Featured in the Dec./Jan. issue of Bloomberg Markets. Illustration by Armando Veve for Bloomberg Markets

In the end, some higher education researchers will judge Guild largely on whether it helps low-income workers graduate from college, one of the keys to moving up in the world. So far, few have, according to a recent study of roughly 56,000 Walmart Inc. workers who’ve participated in the tuition-assistance program it created with Guild. Only about 400 of the Walmart workers have earned bachelor’s or associate degrees since 2018.

Carlson says it’s too early to gauge graduation rates; students juggling school and work often take eight years to complete a bachelor’s. But she says Guild has identified schools with programs tailored to help working adults succeed. And, in her view, degrees are too narrow a measure anyway. She argues that Guild students are gaining new skills and earning promotions, even before they graduate. Still, Carlson acknowledges that Guild has sometimes struggled to manage its growth and promote a diverse company culture. Guild is “my third baby,” she says. “So of course I hold myself accountable.” (Her other two babies are 3-year-old twin girls.)

Despite the setbacks, Carlson remains convinced she’s made a breakthrough in the decades-long struggle to help working adults navigate higher education. Guild has collected data that show its students are persisting with their studies: Three-quarters of the workers who’ve started classes since Guild’s founding have either graduated or are still enrolled. She often talks with a sense of wonder about the company’s growing reach. Guild now has access to a pool of 4 million workers across more than 80 organizations. In a conference room at the headquarters, Carlson made a statement that surprised even herself: A job at Chipotle is “the fastest path” to the middle class for American workers. “It’s crazy,” she says. “It blows my mind.”

Carlson's grandfather, former Colorado Governor Roy Romer, left, and father, Chris Romer, at a campaign stop during Chris' run for mayor of Denver in 2011.
Carlson's grandfather, former Colorado Governor Roy Romer, left, and father, Chris Romer, at a campaign stop during Chris' run for mayor of Denver in 2011. Hyoung Chang/The Denver Post/Getty Images

RACHEL ROMER CARLSON grew up as a scion of education and political royalty in Colorado. Her grandfather, Roy Romer, was a three-term governor of the state and served as chair of the Democratic National Committee. He paid for her and 21 of her cousins to go to college debt-free. “I was born on third base,” she often says. In the 1990s, Governor Romer spearheaded the founding of the private nonprofit Western Governors University, one of higher education’s most successful online ventures. Carlson’s father, Chris Romer, ran a network of charter schools and served as a state senator. Her uncle, Paul Romer, is a Nobel Prize-winning economist at New York University who founded his own education company. The Romers are sometimes described as the ­Kennedys of Colorado. “We’re a family that feeds on conversations about public policy,” Carlson says. “My friends always said that dinner at my house was intense.”

Carlson doesn’t try to hide her youth; she uses slang such as “mad props” and appeared on the Forbes cover in a black leather jacket that matched her long dark hair. Energetic and voluble, she is comfortable sharing personal stories about the difficulty of balancing work and child care, a challenge many Guild students confront. Recently she recalled her mortification when she learned that one of her own daughters had bitten another child at Guild’s on-site day care—the other twin, she found out later. “I was like, OK, this sucks, but all things considered, this is the best outcome,” Carlson says.

She can also be wonky, speaking in long, complex paragraphs peppered with references to government data. Sometimes Carlson stops midsentence to illustrate her point with a diagram. “She’s trying to unpack complicated questions,” says Paul LeBlanc, president of Southern New Hampshire University, a Guild partner that operates one of the largest online programs in the U.S. “She really sees the needs of working adults and the struggles of employers and really is trying to solve for those.”

In the early 2010s, Carlson enrolled in MBA and ­education master’s programs at Stanford, where she’d been an undergraduate. She worked with her professors to identify 300 relatively low-cost schools that appeared to offer a good education. Carlson wanted to understand a complex question: Why weren’t those colleges serving more of the 88 million working Americans who lack college degrees and other useful credentials? In interviews, college presidents told her it was too expensive to run the kind of digital ad campaigns that can reach large numbers of adults who have jobs.

Paying for College, Along With Health and Retirement

Share of workers* who reported employment benefit offered

Around the same time, U.S. companies were starting to offer enhanced tuition benefit programs, hoping to retain workers as the job market tightened in the rebound from the Great Recession. In these plans, companies often agree to provide the maximum funding that workers can receive without having to report it as taxable income, currently $5,250 per year. Some offerings have another attractive feature: Students get the funding upfront and don’t have to wait for reimbursement. But employees tend to struggle scheduling classes and homework around shifts, and historically uptake has been low.

Carlson and her Stanford classmate Brittany Stich, who sits on Guild’s advisory board, came up with an elegant solution. In 2015 they founded Guild to serve as a kind of higher education broker. Like a real estate agent, Guild earns a commission for matching buyers—in this case, students—to sellers, the universities. Companies, like banks that offer preapproved mortgages, provide the financing, except the students don’t have to pay them back.

Over the past six years, Guild has enrolled almost 120,000 students and signed up prominent colleges offering online degrees. These include public universities in Florida and Arizona; private nonprofits, such as Cornell’s online division; and for-profit Penn Foster, which offers high school and trade courses. Guild also sends students to Indiana’s Purdue University Global, which is operated partly by Kaplan Inc., a for-profit education company.

Although Guild is not yet profitable, Bessemer Venture’s Deeter said in late 2019 that it was on course to generate about $100 million in annual revenue. The market opportunity is vast: Georgetown University researchers have found that U.S. companies spend $177 billion a year on formal education, and that figure is likely to grow.

Guild has several competitors, including publicly traded Bright Horizons Family Solutions Inc., which manages tuition programs alongside its better-known day care business. Bright Horizons charges companies a flat fee to manage their higher education benefits. By contrast, Guild shares tuition revenue, taking a slice of the payments that companies make to schools. In 2018 its standard cut for out-of-state students was 35.5%, according to University of Florida emails released under a public records request. Carlson says Guild’s share now ranges from 3% to 35%, depending on the services it’s offering. Another public benefit corporation, called Instride, uses a similar tuition-sharing model to manage ­corporate-sponsored education programs. In 2019, Arizona State University spun off Instride, which has contracts with Starbucks Corp. and Uber Technologies Inc. Its backer is the Rise Fund, an impact investment vehicle from private equity firm TPG.

Federal regulations generally prohibit colleges from tying compensation to student enrollment through revenue sharing or other means. At for-profit colleges, those incentives led to boiler room-style sales tactics to market degrees of dubious value, resulting in a crackdown by the Obama ­administration. But there’s a loophole in the incentive pay ban: Colleges can share revenue as long as their outside contractors offer “bundled services,” not only recruitment. Guild, for example, provides coaching and technology, along with a pipeline of applicants. The company is part of a new generation of for-profit enterprises in higher education, including companies known as online program managers, or OPMs, which design and administer virtual courses for universities in exchange for a cut of revenue.

Robert Shireman, who helped lead the for-profit college crackdown in Obama’s Department of Education, says Guild’s revenue-sharing model worries him, because it might create an incentive to steer students into academic programs regardless of whether they’ll ultimately benefit. “It’s used to allow, essentially, bounties on the heads of students to be paid to a contractor for delivering business,” says Shireman, now a senior fellow at the Century Foundation, a New York-based think tank. “There’s a sordid history.”

Carlson maintains that Guild’s business model is set up to help students succeed. She says the company is paid semester by semester and only if students complete the term. “There is zero good reason for us to ever put a student in a program they won’t be successful in,” she says. For universities, the revenue-sharing arrangement eliminates risk: The schools offload marketing and recruitment expenses and pay only when new students enroll.

In the early years of Guild, Carlson says universities often didn’t take her seriously. “I was a late-twentysomething female. I’m short. I’m young. I was pregnant for a big chunk of it,” she says. So she hired her father to help with the outreach. Ultimately the schools recognized the advantages of a partnership: Public universities, in particular, are eager to enroll out-of-state students because they pay higher tuition. During negotiations in the summer of 2018, the first year of the Florida contract, Chris Romer jokingly informed a University of Florida administrator, Evangeline Cummings, that he’d like a football autographed by Tim Tebow, the former Denver Broncos quarterback who started his career as a UF Gator, according to an email. The response: “Tebow time when you bring us out-of-state students!”

Few Degrees, But More Promotions

Outcomes of the Walmart Live Better U education program created with Guild

WHEN GUILD SIGNS UP new corporations, Carlson savors the wins. She often announces the deals at companywide staff meetings. There are joint press releases with corporations, stressing worlds of possibility. Walmart’s program, Live Better U, was placing a “cap and gown within reach” of all its workers. Walt Disney Co.’s Aspire was helping employees “dream bigger and reach higher.” Before the pandemic, a banner hung prominently in Guild headquarters displaying the number of workers enrolled in the company’s programs.

Behind the scenes, the mood was less celebratory, according to current and former Guild employees. Some coaches have shouldered caseloads ranging from 300 to 1,000 students, leaving them insufficient time to help workers navigate their classes. “Coaches were, day in and day out, hearing excessively negative feedback,” says John Broderick, a former Guild coach. “When we tried to bring up those problems to VPs, managers, executive level, it was kind of dismissed and just seen as one of the costs of doing business, that not every student is going to be happy.” (Guild acknowledges those numbers and says it has hired more coaches to reduce caseloads.)

Guild’s partnership with the University of Florida has been rocky. In 2018, Cummings, who directs UF Online, complained that the company seemed overwhelmed. The school rejected 82% of Guild’s referrals, she said in an email. At one point, Cummings threatened to withhold payments. “I do not know if these are intentionally deviant practices by Guild staff or casual incompetence that result from lack of preparation for a launch of this magnitude,” she wrote to the company’s leadership that June. Carlson came out of maternity leave to manage the crisis, assuring Cummings that her complaints were “of deep concern to me.”

Since the partnership started, only 145 of Guild’s students have ended up enrolling at the University of Florida, the school says; 9 have graduated, and 27 have dropped out. The enrollment numbers left school officials disappointed. “It became a concern of ours early on,” Cummings says. “Are we in this to really help students, or are we in this to be in a press release?”

According to Carlson, the University of Florida rollout was rushed to accommodate a company that wanted to list the school on its menu of options. “It was a bit of an arranged marriage,” she says. Since then rollouts have been smoother, in part because of investments in technology. “We’re a hell of a lot better at that than we used to be,” she says. “But I’m sure there’s huge room for improvement.” In November, Guild and UF agreed to end their relationship.

The overall progress of Guild’s students is difficult to assess. Carlson won’t release standard education industry measures, such as graduation rates. She says Guild and the schools have agreed to keep the numbers private until more time has passed.

The best window into Guild’s performance is a study released in September by the education-focused Lumina Foundation in Indianapolis. Lumina examined Guild’s partnership with Walmart, which enrolled around 56,000 workers in academic programs from June 2018 to April 2021. (That total includes some who participated in non-Guild plans.) According to Lumina, a third of the Walmart students stopped taking classes without completing a program, half remain active, and 13% have earned some kind of credential. Of those graduates, the vast majority earned a high school diploma or completed College Start, which offers a higher-ed prep program. In all, 336 employees received a bachelor’s degree, and 50 graduated with an associate degree.

In its report, Lumina emphasized the students’ success in earning promotions; one of its executives declared that Walmart had taken “a giant step” toward improving education outcomes for its employees. (The foundation recently bought shares in Guild; it says there’s no conflict of interest because the study was finished before the share purchase.) Walmart has also hailed the study’s results, citing the data as evidence that its tuition assistance program is helping workers develop new skills and move up the company ranks. Kathleen McLaughlin, the company’s chief sustainability officer, says Walmart is still determining whether students who received short-term credentials ultimately move into new industries. “That’s something we’re just now digging into,” she says.

Iris Vazquez Morales managed a Chipotle branch in Seattle.
Iris Vazquez Morales managed a Chipotle branch in Seattle. Photograph by Chona Kasinger for Bloomberg Markets

In judging Guild’s impact, Carlson points to students such as Iris Vasquez Morales, who was managing a Chipotle branch in Seattle when she enrolled through Guild in an online bachelor’s program at Bellevue University, a private, nonprofit institution in Nebraska. She finished a degree in human resources last summer and was recently promoted to a recruiting position at Chipotle. “Having to go back and write papers constantly, read a lot—that was challenging at first,” says Vasquez Morales, 31. “But after my first class, it was definitely a lot easier and became supereasy, and I was able to do it.”

Other students have found the online learning ­experience frustrating. In the spring of 2019, Cameron Norby, a 23-year-old warehouse worker at a Lowe’s store in Cheyenne, Wyo., used the Guild benefit to enroll in a virtual Penn Foster trade program. He wanted to become a residential electrician; the Penn Foster website said he could expect to earn about $60,000 a year, more than twice what he made at Lowe’s. But after a few classes, he started wondering about the utility of the program: How was he supposed to learn to change a switch if he couldn’t touch anything? “I wasn’t actually doing any of the work they were teaching,” Norby says. He dropped out in early 2020 and still works at the Lowe’s warehouse. (Guild and Penn Foster say the program is designed to prepare students for an apprenticeship. “It’s a bummer that he didn’t feel engaged in his first chapter of the learning experience,” Carlson says.)

The stories of struggling students have hurt morale on Guild’s coaching staff. Broderick joined Guild after a stint as a teacher because he was inspired by the company’s ­market-based solution to inequality. Gradually, though, he grew convinced that big companies were setting up their workers for failure by refusing to offer flexible schedules. He left in July 2020, after a year at Guild. “We are a bandage on an amputation wound right now,” he says. “We are much more a tool for companies like Walmart and Disney to attract and retain employees than we are a resource for people to attain economic stability.”

Lowe’s worker Cameron Norby in Cheyenne, Wyo.
Lowe’s worker Cameron Norby in Cheyenne, Wyo. Photograph by Eli Imadali for Bloomberg Markets

IN 2019, CARLSON HELD a get-to-know-you breakfast meeting with a small group of rank-and-file Guild staffers. An employee asked Carlson a charged question: Why didn’t Guild have a chief diversity officer to address racial inequality at the company? Carlson dismissed the idea, saying that she’d spoken with other CEOs who “regretted” investing time and energy in such a position, according to a former employee who witnessed the exchange.

Concerns about diversity at Guild intensified after George Floyd’s murder in May 2020. A month later one of the company’s few Black senior leaders, a human resources vice president named Monique McCloud, led a well-­attended webinar on Black history that morphed into a wide-ranging discussion about racial inequality at the company. Employees complained that Black staffers were routinely denied promotions and that the lack of diversity on the coaching staff made it harder for the company to form strong relationships with students from backgrounds underrepresented in higher education.

A couple of months after the webinar, McCloud left Guild. In a call with Black employees shortly before her departure, she said that the company wasn’t listening to her and that she lacked “a seat at the table,” according to three people who participated. McCloud declined to comment.

Carlson, who declined to comment on McCloud’s departure, says she doesn’t recall making the chief diversity officer remark and that it doesn’t reflect her views. At the time, a senior manager handled equity issues among other responsibilities, Guild says. But Carlson acknowledges that the fast-growing company had failed to prioritize diversity in its rush to recruit enough employees to coach students. “I lost sleep over it,” she says.

The company has now appointed an executive to focus exclusively on its diversity efforts. Over the past year and a half, Guild says it’s altered its hiring practices and ­instituted new programming to promote racial equality. Since April almost 40% of new hires have come from underrepresented groups; Guild’s staff is currently 71.5% White and 7% Black. The company says internal data show it has promoted Black employees at rates the same as, or higher than, their White colleagues.

Carlson has taken the criticism seriously. “This work is very personal to me,” she says. “I’ve spent a lot of time reflecting on my own journey. I really do believe we grew up in a racist society.” She’s voiced support for progressive policies, including a wealth tax that could eat into the fortune she’s accumulated at Guild. “We’re not going to solve economic mobility on our own,” she says. Carlson is clear-eyed about the inherent complexities of her project: a for-profit enterprise that aims to serve front-line workers as well as companies and universities—two institutions that have often failed adult students.

When she met Guild’s new hires in September, Carlson showed a PowerPoint presentation full of complex charts and graphs mapping her efforts to balance the ­sometimes-contradictory interests of schools, companies, and workers. “We have three stakeholders, and we sit at the tension of trying to serve all three of them well,” she told the employees. “That’s difficult.”

Carlson spoke quickly, hardly touching the cup of tea in front of her. “If you are ever frustrated that we have to make trade-offs for an individual student in order to serve more students, you’re going to have to find a way to balance with that,” she said. In a perfect world, she continued, Guild would assign one coach to every student, a personalized form of ­mentorship. But that would hold back the company’s growth.

“This is not motherhood and apple pie,” she said. “We are embracing the tensions.”

Yaffe-Bellany reports on legal and business news in Washington.

More On Bloomberg