What Can Employers Do About The Student Loan Crisis?
There’s news about the student loan crisis just about every day. College tuition is going up at a greater rate than wages. Daycare costs more than college, leaving parents unable to save beforehand. The average student graduates with over $37,000 in student loan debt, often deferring payments and increasing their debt overall.
According to Florida Representative Dennis Ross, “Unfortunately, most students today are saddled with extraordinary debt and are entering one of the weakest economic recoveries in history. . . More than 43 million Americans owe nearly $1.3 trillion in student loans, with a repayment delinquency rate of 11.6 percent. That’s more than $150 billion in student loan delinquency, not including interest. This is a serious problem we cannot continue to ignore.”
An Educated Workforce Is Better For The Economy
We all know that individuals who have achieved a higher level of education do better financially in the long run, but that principle also scales to the entire economy. Our economy actually does better when more people are better educated.
According to the Economic Policy Institute, investing in education is the single best thing we can do as a society to better the lives of individuals. In a recent study, they found:
- States with the highest wages are also the best educated
- Investing in education can lead to greater economic opportunity
- States with more educated workers can attract higher wage jobs
- Initial investment in education can return greater tax income to the state in the long run as wages grow
Why Employers Should Pitch In
Even if some magical force rendered college tuition free tomorrow, we would still have an entire generation of students saddled with student loan debt. More and more companies are offering signing bonuses, tuition reimbursement, and other forms of help for students these days. Companies want to attract and retain top talent, and offering relief from student loans is certainly likely to help you keep your employees happy.
In one study, healthcare giant Cigna was able to achieve a 129% ROI on its tuition reimbursement program, mainly through retaining talent. In that same study, employees who took advantage of the program were able to gain promotions within the company, resulting in an average wage increase of 43%.
Even companies like Best Buy and Starbucks are investing in the education of their workforce, with Starbucks explaining, “College education is a priority for Starbucks partners, but for many, the rise in tuition costs has put college out of reach. We know that there is a clear and demonstrated value of having a college degree, both the opportunity it affords and the measurable impact on earning potential throughout a lifetime.”
One of the student loan repayment proposals on the table right now was proposed by U.S. Representative Dennis Ross. Under his plan employers would get tax credits for matching up to $500 a year in student loan repayment for up to 3 years, but only for students who have an associates degree or higher and who have more than $10,000 in student loan debt. Says Ross of the plan, “Overall, this bill is designed to help students become gainfully employed and pay off their loans while employers are benefited by hiring skilled and educated employees with a vested interest in long-term employment.”
Work Study Programs May Not Be Enough
Many students opt to take advantage of work study or resident advisor positions in order to lessen the burden of college costs, but that may not be enough. If employers can pitch in to make up the difference, there will be a better educated and less burdened talent pool to be attracted and retained, and there may even be some tax benefit to employers in the near future.
Student loans follow people around for the rest of their lives, unable to be bankrupted. In today’s economy with stagnating wages and greater competition over jobs, student loan debt is tantamount to a noose around your employees’ necks.
Preventing student loan debt before it starts is crucial to loosening those nooses. Learn more about the possible alternatives to student loan debt from this infographic. You might be surprised how many other options are out there!
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Author: Brian Wallace
Brian Wallace is the Founder and President of NowSourcing, an industry leading infographic design agency based in Louisville, KY and Cincinnati, OH which works with companies that range from startups to Fortune 500s. Brian also runs #LinkedInLocal events nationwide, and hosts the Next Action Podcast. Brian has been named a Google Small Business Advisor for 2016-present and joined the SXSW Advisory Board in 2019.