hr: student loan repayment as compensation
TRANSCRIPT
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Background
● Traditionally, large employers trained their
own workforces (Examples: Nucor Steel,
Ford)
● With the expansion of compulsory (and
public) schooling in the early 1900s,
industry collaborated with local schools on
skills and curriculum required of their
incoming workforceo Modern example: Kentucky Occupational Skill
Standards (KOSSA) high school assessment
o This also continues today in the form of candidate
pipelines at preferred colleges
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The Perfect Storm
● As we became a post-industrial society
competing in a global knowledge economy,
college diplomas became a prerequisite to
the most basic of jobs
● This coincided witho The American business community expanding the
socialization of workforce training costs through
collaborations with schools
o College tuition rates rising much more rapidly than
the cost of inflation
o Public funding of college attendance not keeping
up with the rising costs
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The Perfect Storm (in charts)
Private lenders begin
lobbying Congress
to remove student loan
bankruptcy protections
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The Perfect Storm (in charts)
Bankruptcy
Protections
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The Perfect Storm (in charts)
Yellow is inflation-adjusted state financial aid paid per student.
Red is inflation-adjusted out-of-pocket tuition costs paid after all
non-loan financial aid is exhausted.
http://economix.blogs.nytimes.com/2012/03/02/why-tuition-has-skyrocketed-at-state-schools/?_r=0
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The Problem
So what is “the other 98%” to do at the risk of
being unemployable? Take on student loans to
cover the difference.
http://www.motherjones.com/politics/2013/06/student-loan-debt-
charts
Bankruptcy
Protections
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The Problem
70% of undergrad students, of
your employee pipeline, now
have student loan debt
burdens.1,4
Student loan debt
disproportionately affects
minorities and those from less
advantaged households.● 81% of African-American grads
have student loan debt.2
1. http://blogs.wsj.com/numbers/congatulations-to-class-of-2014-the-most-indebted-ever-1368/
2. https://cdn.americanprogress.org/wp-content/uploads/2012/10/WhiteStudentDebt-5.pdf
3. http://hereandnow.wbur.org/2012/05/15/student-loans-debt
4. Student Debt and the Class of 2013 - Institute For College Access and Success
The class of 2014 owed an
average of $33,000 per student.1
10% of students owe more than
$54,000.2 3% of students owe
more than $100,000.3
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Why Should HR Care?
● Financially unstable employees are more likely to job
hop, seeking higher pay to try and cover student loans
which have no legal recourse for discharge.
● Student loan lenders are known to actively research
work phone numbers and disrupt your employees at
work, hounding them for repayment.
● Student loans disproportionately affect minorities,
making it that much more difficult to recruit and
retain a diverse workforce.
● Studies have found that “cumulative student loans
[are] significantly and inversely associated with better
psychological functioning.”
Sick of our loans: Student borrowing and the mental health of young
adults in the United States - Walsemann, Gee, Gentile
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Why Should HR Care?
Studies have shown that higher levels of debt
can lead to stress, which can ultimately lead
to health issues
● ex. high blood pressure, heart disease,
anxiety, weaker immune system
● This would in turn increase healthcare costs
for businesses
The high price of debt - Sweet, Nandi, Adam, McDade
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The Opportunity
● With the competition for talent
being fierce, companies are
turning to exotic / fringe benefits
to recruit and retain employees.
(Examples: Facebook, Google)
● To stand out to prospective
employees, and retain the ones
you have, you should offer
student loan reimbursement as a
form of compensation.
(NPR) - Kelsey
Griffith of Ottawa,
OH, graduated
with a 4-year
degree from Ohio
Northern
University with
$120,000 in debt.
The payments
start at $900/mo.
http://hereandnow.wbur.org/2012/05/15/
student-loans-debt
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The Small Leap to SL Reimbursement
● Many companies, acknowledging the edge
that higher education offer its workforce,
have long offered tuition assistance as a
form of benefit.
● This benefit is often structured as a
reimbursement after a course has been
completed.
● We propose expanding this into post-
tuition reimbursement (student loan
repayment).
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Best Practices - Retain
“While a repayment program will likely bring significant
costs, it will pay dividends in the long run.” -Ann Hollingsworth, HR, Memorial Hermann Health System
● MHHS in Houston, Texas is one of the latest employers
to set up a student loan repayment benefit program.
● Full-time and part-time employees who have earned a
degree within the last three years are eligible.
● Employees must commit to stay with MHHS for at least
two years after the final loan repayment.
● The program is paid for through the lower, overall
cost of hiring people due to a higher retention rate
and increased productivity from more engaged
employees.http://www.bizjournals.com/houston/morning_call/2015/02/
major-houston-employer-to-help-repay-employees.html
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Best Practices - Recruit
● Montana found it difficult to recruit public
school teachers in rural areas.
● The Office of Public Instruction set up a
student loan repayment assistance program
for targeted areas.
● Teachers were eligible for student loan
repayment assistance of up to $3,000 a year
for four years, for a total of up to $12,000.
● 141 teachers were awarded $417,000 in
student loan repayment assistance.
● Mississippi has a similar program.
http://www.kaj18.com/news/mt-teachers-in-critical-shortage-areas-may-get-student-loan-help/
http://higherednotdebt.org/blog/montana-wants-employers-pay-employees-student-loans
If Montana HB341
passes, all Montana
employers would
get a tax credit of up
to $450/ employee
annually for up to
three years against
either their
corporate or
individual tax
income, if they
directly kick in
$1,800 to lower their
employee’s student
loan debt.
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Best Practices - Public Sector
● If your employees qualify as public
servants, the Consumer Financial
Protection Bureau recommends structuring
your student loan repayment program
around existing government student loan
forgiveness programs.
● Help your employees fill out the Public
Service Loan Forgiveness (PSLF)
paperwork.
● Directly make the monthly loan payments
for your employees, instead of providing
the benefit in a lump-sum.
Cincinnati City Councilman
P.G. Sittenfeld in 2014
announced the city’s
College Affordability
Assistance Program, which
educates employees about
PSLF and helps them with
the paperwork.
http://files.consumerfinance.gov/f/201308_cfpb_public-service-toolkit.pdf