Is Fear of Student Debt Holding Your Employees Back?


Posted In: Workforce Insight

Mar • 1 • 2017

Fear of Student Debt Holding Back Your Employees

The challenge of student debt is well documented in the popular, financial, and higher education press. Over the last 10 years, the combination of higher tuition fees, increased student enrollment, and greater reliance on loans has caused outstanding student debt to nearly triple to more than $1.2 trillion.


According to recent statistics by The Institute for College Access and Success, 68 percent of the class of 2015 at public and nonprofit colleges had student loan debt, with an average balance of $30,100 — an increase of 4 percent over the previous year.


Ideally, student debt should be “good debt” that is manageable and allows students to move into high-income careers. For example, according to 2013 Census Bureau data, the lifetime earnings of the typical bachelor’s degree holder is more than twice that of workers with only a high school diploma.

Not all debt is created equal, and overall debt loads are rising faster than incomes, decreasing the chances of an investment in education paying off. According to research from the W.E. Upjohn Institute for Employment Research, student debt burdens have increased for average borrowers by 163 percent over the last 25 years, while wages for college grads have only increased 1.6 percent.


These issues have varied effects on different student populations. Low-income students, especially African-Americans, are more likely to graduate with a debt burden. A Demos study of Pell grant students (i.e. low-income students) at public universities, found that 81 percent of Pell-funded African-American graduates have student debt compared to 63 percent of white students. 38 percent of low-income borrowers drop out of college compared to 25 percent for students from high-income families.


Much of that total student debt is taken on by students who don’t graduate. According to the U.S. Department of Education, students who don’t graduate are three times as likely to default. Non-completion is a particularly big risk at for-profit colleges. Between 2001 and 2009, the noncomplete rate for students from for-profit schools and whose cumulative debt was greater than their annual income rose from 13 to 31 percent, according to the National Center for Education Statistics.


Student loan delinquency can cause substantial problems throughout life, ruining credit and making it harder to buy a home and start a family. However, under the right conditions, the rewards of investing in education are worth it.

Scaring off students?

With new options designed for completion and affordability, higher education is more attainable for working adults today than ever before, yet understandable caution on the part of potential students may be holding them back. For example, a recent academic study found that student loans were “associated with poorer psychological functioning.”


Student debt has “reduced the ability of our educational system to be a force for upward mobility and for an equitable chance at upward mobility,” Melinda Lewis, associate professor of the practice at the University of Kansas School of Social Welfare, told CNBC in a piece about the high economic and social costs of student loan debt. “It is still true that you are better positioned if you go to college, but you are not as much better positioned if you have to go to college with debt.”

Mitigating debt with tuition assistance programs

For companies assessing the needs of their workforce, the benefits of education — whether in the form of a bachelor’s degree or a more specific type of training — are well known. Employees who undertake education programs emerge with new up-to-date skills, heightened critical thinking, better communication and a greater sense of personal and professional purpose. Unsurprisingly, though, fear of debt instills a reluctance among employees to explore their education options.


This is why an increasing number of companies are considering tuition assistance programs, which support employees in furthering their education while reducing — and sometimes even eliminating — the burden of debt. A 2015 report from the Society for Human Resource Management revealed that 56 percent of employers offer undergraduate tuition assistance.

The report shows that some employers develop their own educational programs while others outsource to colleges and universities, and the amount they reimburse varies widely, from capping it at a certain dollar amount to covering the full cost of tuition.

Mitigating debt with better degrees

Another factor holding working adults back from continuing their education is that they may have lost confidence in the value of a degree. A recent survey by Public Agenda shows that the number of people who say a college degree is necessary has been steadily declining and that 46 percent say “a college education is a questionable investment because of high student loans and limited job opportunities.”


Alison Kadlec, Public Agenda’s director of higher education & workforce development programs, says the survey results show that educational “leaders must take the growing public mistrust of higher education seriously. This means clearly measuring and communicating about the benefits and outcomes of a college education, especially what happens to students in the job market after they graduate.”


While financial support like tuition assistance programs make a big difference for adult workers and their employers, another effective leverage point is the design of the degree program itself. Many people don’t realize that innovations in higher education can make a degree more affordable, not less, and make it more likely that students will complete degrees that are valued in the marketplace.


In fact, thanks to online competency-based education models, some forms of higher education are more affordable and more effective than ever. Competency-based learning programs — such as those from College for America — are built around real-world projects to maximize the likelihood that employees will use what they learn in their careers. Our recent impact research has shown that 86 percent of students agree that College for America programs will help them with their current job.


Working adults have good reason to tread carefully around higher education debt, but employers can make a difference by directly confronting those concerns. With close attention and the right partner, student debt can be minimized and manageable, and it can pay off in real career growth.


Related reading: 6 Ways Companies Can Support Degree Completion for Employees

Keith Loria is a journalist who has been writing for major newspapers, magazines, and the Associated Press for nearly 20 years.