Tackling Employee Student Debt
What should be the employer’s role?
Students will be heading back to school in another month or so, and along with the excitement of a new school year comes the stress of figuring out how to pay for it. Federal student loan interest rates have been on the rise, up from 3.76 percent in 2016-17 to 5.05 percent for the 2018-19 school year. Interest rate hikes may be leveling off. But the number of people behind on paying back their student loans has grown to 20 percent, up slightly from 19 percent in 2016 and 18 percent in 2015, according to the Federal Reserve.
Imagine the stress it causes parents and graduates alike to know they will have debt hanging over them for decades. Last fall, the U.S. Department of Education released data showing only 50 percent of students attending college during the 1995-96 academic year had paid off their loans within two decades. In spite of what a student might’ve studied in college and which employer could be an ideal fit, graduates are increasingly forced to think about choosing the best-paying job available to manage student loan debt. I’m not arguing for or against the value of college for all, but at the forefront of decision-making these days, high schoolers and their parents are very much making choices about postsecondary education vis-a-vis debt.
What if the majority of companies (in partnership with universities, four-year and two-year colleges, and trade schools) took a different role helping students pay off those student loan debts? For example, students at the University of Utah have access to an income-sharing system piloted by the administration. Students get a break on tuition, and in return the university gets a cut of their income after graduation for a certain time period. The College Post recently quoted the university’s president saying the school’s program, called Invest in U, would help students, for example, avoid interrupting their studies because they had to work to pay for classes or living expenses. The Invest in U payback would cost students just under 3 percent of their income and last three to 10 years, depending on the student’s major.
Some private-sector employers are now adopting student loan contribution programs to attract and retain talent. Two companies that focus on administering these programs are Gradifi and Tuition.io, which offer software platforms for employers to manage student loan repayment benefits for employees. According to both software companies’ websites, a variety of employers currently participate, and the contributions range from about $1,000 a year per employee up to an agreed-upon maximum. Companies set the dollar amount and decide whether to make the payment to the employee or the loan-servicing company. Some companies even allow employees to convert unused, paid vacation time into money toward paying down their student debt. If you’re cash-strapped, how tantalizing is the thought of a “staycation” anyway? Better to put the money toward getting out of debt.
As these benefit programs evolve, employers should consider working with colleges and universities to begin the recruiting process earlier. If a student and an employer see a link between the student’s interests and major field of study and the company’s culture and mission, recruiters and school counselors can create a strong offer together with contingencies that protect all parties.
Identifying talent early in someone’s academic career and subsidizing their learning isn’t unlike the work the military has undertaken for a century or more in this country. For example, the Reserve Officer Training Corps, which the federal government established in the early 20th century to add to the ranks of the military’s leadership, offers high-school seniors a four-year, full-tuition scholarship and a commission in a branch of the U.S. military upon receiving a bachelor’s degree. The commitment after graduation requires several years of serving on active duty with the military to repay the cost of the scholarship.
What if a college student early in their education demonstrates amazing potential through an on-campus visit with company officials? The employer might (for a future high-potential hire) see the benefit of paying for the student’s tuition senior year in return for a commensurate commitment to work for the company. That sounds like an investment in both a company’s and a graduate’s future.
Lee Maxey is CEO of MindMax, a marketing and enrollment management services company. To comment, email firstname.lastname@example.org.
Originally published here in Chief Learning Officer magazine.