This morning we met with David Chang, CEO of Gradifi, Andy Porter, Chief People Officer at Broad Institute, and Jackie Crain, Senior Manager of Total Rewards at Suffolk Construction at the Gradifi offices in Boston to discuss the student debt crisis. As local people operations leaders, they had a lot of interesting things to say about the mounting issue of student debt and the role that people teams and employee rewards programs are playing in this complex issue. Our notes from the conversation, along with the full video, are below.
The Trap of Student Debt
For many students, looming student debt forces them to make different decisions about their career. Whether they have a specific career path in mind or not, many recent grads find themselves giving up an attractive job for one that ensures them financial security. Having this financial burden makes students more likely to avoid risk even if it means turning down a job they want. With millennial and Gen Z employees who are not passionate about their work, many companies are facing high employee turnover for this demographic.
Debt and Diversity
While all kinds of students are trapped by debt, the burden of student debt is disproportionately borne by women and minorities. As a result, businesses that rely on the promise of future equity rather than a cash now business model are unable to attract diverse candidates.
When coupled with debt, the cost of living in certain cities also serves to decrease diversity. For students from other parts of the country, moving to an expensive city while still trying to pay off their debt is untenable. This prevents businesses from being able to reach a wider pool of candidates.
The Role of Employers and Organizations
With such a large portion of the future workforce struggling to pay for education, employers have the opportunity to play a role in helping to reduce student debt. However, there is some debate over how much involvement or responsibility and organization should have for paying down student loans.
Some organizations envision student debt assistance as an essential option for a flexible benefits package. On the other hand, some companies that already offer competitive 401(k) plans may grapple with the idea of offering student loan payments. While these businesses acknowledge that students with a lot of debt need money in the present, they also see the benefit of helping employees save for the future.
An important question for both employees and employers to consider is how the offering to pay down student loans will affect employees’ salaries. However, it seems as though offering packages to help pay off debt is attractive to potential employees even if it means a slightly lower salary as it makes potential employees feel like the company truly cares about them.
Helping students battle their debt has an emotional aspect that resonates with perspective employees and can thus help businesses to attract and retain more talented candidates.
The Outlook for Future Educational Requirements
Despite the mounting cost of a traditional four-year education, it seems unlikely, at least in the near future, that businesses will see a shift in their educational requirements for employees. However, with new options for e-learning on the rise and such increased price sensitivity, educational institutions will have to get more creative in terms of how they offer education.
The Future of Student Debt
While it’s impossible to know what the future will hold, it is clear that the way the issues of education cost and student debt will have to change. If employers, as an alternative to students, are the ones who bear the burden of student debt, large companies may eventually be able to apply pressure to universities to reduce the cost of education.
As those impacted by student debt become adults, we may see a shift in how people approach saving for college. We may see a shift how people value education and universities as well. While people typically value a school based on how competitive or well-known it is, they may instead start to understand the worth of a college in terms of the economic return it can provide.
You can watch the full video of our conversation here:
How is your organization changing due to student debt?