Is Student Loan Repayment the Answer to Diversity?
The idea of student loan repayment as a work benefit has been growing in popularity in the past couple of years. It can seem like a nice-to-have offering targeting “those millennials” looking for help paying off debt and managing their budget. But when we look deeper at what inequities in the student loan debt load in America is really doing to our workforce, student loan repayment suddenly seems a lot more important.
Student loan debt has grown to nearly 1.5 trillion dollars, and on an individual level, it has eclipsed all other forms of debt for most Americans – including credit card debt (source). Consider this: according to the US Department of Education in 2017, less than half (47%) of borrowers in repayment paid at least one dollar towards their principal balance in the first five years of the repayment period.
The accessibility of student loans – both those backed by the government and private entities – is something of a double-edged sword. While they make it possible for more people to attend college, they have a disproportionate long-term financial impact on women and people of color. Both groups are more likely to come from families that don’t save as much for college, are more likely to take on private loans that have higher interest rates, and are less likely to have other sources of family wealth (source). But as both groups increase their participation in the highly-skilled workforce and attain higher degrees, this access is coming at a huge cost.
Despite near parity when it comes to the percentage of the population with a four-year degree, women hold two-thirds of all student loan debt, or nearly twice as much as their male counterparts. This equals over 900 billion dollars. Not only are women more likely to have debt, but they have fewer resources to repay it, given the national average of women earning $0.78 on the dollar as compared to men.
For people of color, it’s even harder. A recent study by the University of Wisconsin showed that at age 25,
“black youth report 83.3% more debt than their white counterparts, after adjusting for family background and postsecondary characteristics…After adjusting for all intercept controls, the black/white disparity in debt grows by about 6.8% annually. That is, black youth start their young adult careers with more debt than whites, and this disparity grows over time.”
In this light, the idea of student loan repayment seems like less of a fringe benefit than an imperative to ensure diversity and equity in the workforce. And until major education funding reform, the gap will only grow wider. By offering such benefits, your organization may be able to better target new and diverse talent pools that might not be able to afford to work for you otherwise.
I will be continuing to look at this evolution of financial wellness and benefits in the next couple weeks, so stay tuned!