Student loan debt is one of many debated topics in the political arena these days. Not only was student debt cancellation one of the campaign promises of the Biden administration, but we’re now in a midterm election year. So, yea, it’s a hot topic, even if for reasons we quickly dismiss. But perhaps we should be paying more attention, and here’s why. The student loan debt balance in the United States has been increasing for decades. The result? A staggering 44 million Americans now owe a combined $1.7 trillion in student loan repayments.
The tuition fees have risen astronomically (the average tuition growing by 120% at public universities and 76% at nonprofit universities respectively) between the years 1995 to 2017. However, while tuition has risen household income has remained stagnant, leaving families to seek federal and private loans resulting in significant debt.
Today the average student loan debt is an overwhelming $28,000 among students who graduated in 2019-2020. And although debtors have not been required to pay since 2020, the temporary reprieve for student loan payments don’t really accomplish much, as debtors will be paying the same principal amount and accrued interest once payments resume. Essentially, it’s just kicking the can down the road to be addressed later.
Unfortunately, when there are many systemic shortages that cause mounting debt to borrowers, it actually undermines efforts to gain upward economic mobility. This results in Americans turning to other avenues in order to find support in paying their student loans, such as nonprofit organizations and even their employers.
Why student loan debt is a social justice issue.
While the idea of borrowing money and paying back the same amount with interest seems straightforward, with student loans it is anything but. Some demographics are more vulnerable to different forms of debt than others. In fact, people of color are sometimes pressured – through practices of labor-market discrimination - to be better credentialed than their white, Caucasian and European descent counterparts, even if it doesn’t improve their job prospects.
The result of said pressure means people of color may pursue additional education thus incurring even more debt. Data from the Economic Policy Institute has shown that Black job applicants with equivalent or superior credentials are less likely to get called back than white applicants.
However, we also know that people of color are often under-resourced compared to those who self-identify as white, Caucasian, or of European descent. Historically marginalized families are commonly faced with inequality with school resources ranging from school equipment, supplies, counselors, student-teacher ratios, and extracurriculars, making it even more difficult for them to get a high-quality education. These inequalities were further highlighted through the course of the COVID-19 pandemic, when more than two in five low-income households had limited access to computers and the broadband internet services, which was a necessity for virtual learning.
As a result, they may also be disadvantaged by the racial wealth gap when it comes to funding their education, and also when it comes to earning more in the long run. To illustrate this disadvantage with regard to compensation, for every dollar earned by a white man, Black men earn 87 cents and Hispanic men 91 cents to the dollar.
Beyond the disadvantages in the job market, the financial strain also negatively impacts mental health, the ability to buy a home, start families, make other investments, and ultimately build generational wealth.
Having said that, I believe nonprofit organizations and companies are in the position to utilize their resources to provide aid to borrowers. Matter of fact it’s already being done by some, albeit very few. But perhaps companies and nonprofits have much further to go in the type of action they take.
How corporations can assist employees.
Companies thrive when they are diverse. But what this means for companies is that they provide robust programming to assist employees that identify with and belong to historically marginalized and disadvantaged communities that have less access to the economy and have less financial security.
Today, there is certainly more awareness about diversity, equity, inclusion - and dare I say justice and belonging - initiatives companies can take in the form of workshops, training, use of inclusive language, improvement of workplace design and facilities, testing and tweaking of biased technologies used for work, and improved harassment and discrimination complaint process. But while these programs may not always include helping the members of these communities with student loan debt alleviation, maybe it should.
One such company that’s made strides in supporting employees with student debt assistance is PricewaterhouseCoopers (PwC). For example, PwC's policies and programs helped to address employees’ mental health issues and financial strain at the same time. The cherry on top is that it also resulted in higher rates of employee retention and engagement. PwC also stressed that in order to provide effective student loan paydown benefits, companies must do extensive research and preparation in order to make sure that at the same time, no one in the company is disadvantaged by the processes.
Programs for nonprofit employees
While some nonprofits offer student loan assistance or connect you to local organizations that do the same, one of the best known and most common ways working in the sector can assist in student loan debt payments is through the Public Service Loan Forgiveness (PSLF) program. The program allows employees working full-time at a 501(c)(3) nonprofit to be eligible for student debt loan forgiveness for certain loan types. But the program requires an employee to have been working in the nonprofit sector for 10 years and making their monthly payments in the meantime. In theory it sounds great, but many nonprofit workers earn a modest income and until they reach that 10-year mark, the payment on these loans can cause a massive financial burden.
Unfortunately, while the PSLP program does exist, it’s been widely believed to be severely mismanaged. According to a report, 98.2% of borrowers who applied for loan forgiveness were denied. The same report also found that previously successful applications were subsequently denied and that borrowers from the same organizations commonly received inconsistent responses. In some cases, borrowers would be paying towards what they believed would be counted among the 120 minimum qualifying payments—only to find out later that their payments had been unqualified and that the duration of their qualifying payments would be extended.
Compounding on this, those working in the nonprofit sector that may be participating in the PSLF program may sometimes opt to leave the sector for a higher salaries position with a for-profit company, understandably so. And this makes sense given the average debt accrued by college graduates is approximately $37,000. It’s also assessed that many of the nonprofit employees leaving the sector are from minority groups—including first-generation college graduates, people of color, and women—who generally have higher debt.
It’s also worth noting that in addition to the PSLF program, borrowers working for nonprofits can also reach out to other forgiveness programs as an alternative.
While borrowers working for certain companies and nonprofits are able to benefit from the assistance provided by their employers, these programs are still largely inadequate or not widely adopted. For instance, reforms to the PSLF program still need to be addressed and implemented to be more effective. One such measure taken recently was a time-limited waiver that takes effect retroactively so that previously disqualified loan payments are now counted towards forgiveness. For military service members, this means allowing all months spent over active duty to count towards PSLF despite their loans not being actively repaid.
Of course, there also remains the issue of borrowers who work in places that aren’t able to provide such benefits. After all, the pandemic has largely disrupted employment in the country, highlighting existing issues in the job market and creating new ones.
Ultimately, solving the student loan debt crisis requires systemic change—on the part of the government, the schools, and student loan lenders. But in the meantime, private companies and organizations can lessen the burden on the community by innovating the same research and design methods used in their student loan repayment to provide assistance to borrowers who need aid. There may actually be a way for them to innovate on models that can become the basis of more universal implementation. But the question remains, will they? While I don’t have the answers to that, I’m curious to know what you think. Do large institutions have the will to do so? I suppose time will tell.
Article written by Renata Jamila
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