If a college student from the 1970s time-traveled to 2018, they would be utterly flummoxed by the state of student loan debt in the U.S. today. Between 1978 and 2012, the average price of an undergraduate degree increased 1,120% percent. In a struggle to keep up with the rising costs, students are borrowing more in college loans than ever before, leaving many graduates and their families buried in debt post-graduation.
Higher education has always been considered a prerequisite for landing a job in a way that previously never involved employers, but as the demands of student loans have increased, so should the involvement of employers in helping to ease this weight for their employees. After all, the student debt problem is daunting, with $1.5 trillion in loans outstanding and millions of Americans struggling to pay off their debts. The sheer scope of the numbers ensures that businesses have an obligation to assist their employees just as they demand the best from them.
How did we get to this place of crisis? And how can employers provide some relief for their employees shouldering the burden of student loans?
The Culprits: College Tuition Increases, State Budget Cuts, and a Boom in For-Profit College Enrollment
The cost of education has increased so rapidly, the average American family cannot keep up with it. College costs have quickly outpaced wages or inflation; for example, the average salary did not make a 1,120% jump since 1978. Thus, we're left with a situation where people have growing student debt burdens without having more means to repay their debts.
State budget cuts to higher education funding—particularly after the recession of 2008—resulted in public college tuitions rising at a rate that is unmanageable for many families. Adjusting for inflation, overall state funding for public two- and four-year colleges in the 2016-2017 school year was approximately $9 billion below the 2008 level. When states decrease their contributions to public colleges and universities, schools make up the difference with tuition increases, cuts to academic services, or both.
Additionally, enrollment in for-profit colleges has skyrocketed in recent years. Between 2000 and 2009, the number of students enrolled in for-profit colleges tripled, and students at these schools default at a rate that's four times that of students at community colleges.
The New Trend Providing Employers With an Opportunity to Help Solve the Debt Crisis
Employers have a responsibility to evolve with the ever-growing financial demands placed on anyone seeking a higher education degree—which is a must-have for even entering the workforce at this point. Employers also have a unique opportunity to mitigate the crisis by offering their employees an innovative and game-changing suite of benefits.
Over the past couple of years, student loan repayment has emerged as a must-have for companies looking to attract and retain the best young talent. Organizations offering their employees monthly contributions toward their balances, or even one-time bonus payments, have established themselves as innovators in a landscape where debt is more of a concern than ever before. In return, this has made those organizations highly sought after by applicants, as 85 percent of potential employees accept a job offer from a company that provides this benefit.
In offering employees a student loan repayment benefit, employers are providing workers with a perk that they critically need, and the result is that they want to take advantage of it for as long as possible. According to American Student Assistance, 86 percent of young workers (ages 22 to 33) surveyed would commit to working for a company for five years if it meant receiving help repaying their student loans. As young people are more likely to be open to switching jobs, such benefits will help companies retain and develop their employees.
As attractive as student loan repayment is, it's only one part of the solution. Employers offering a complete package of benefits that address past, present, and future financial obligations are truly helping stem the rising tide of the student loan debt crisis. These benefits include refinancing solutions, access to low-interest loans, and educational tools designed to help employees manage their loan balances and other expenses. Understanding the best ways to pay back student debt and avoid incurring it in the future is just as helpful as any financial contribution.
Hope for the Future
Student debt has reached a staggering level in this country, and it's going to get worse without the proper intervention. Still, employers as a whole are now in the position to help millions of Americans deal with this financial issue in a meaningful way. Student loan benefits offer a real-world, impactful system to address the current crisis state of U.S. student loan debt and start working toward a solution.
Visit CommonBond for Business™ to learn more about incorporating a student loan benefits program at your company.