There Are Concrete Ways Businesses Can Help Lower Student Debt
Higher education remains valuable to young Americans, but is far too expensive and no longer aligns with students’ professional needs. The college financing system, while well-intentioned, is failing. Not one single constituency—college graduates, student borrowers, universities, or business leaders—would give it a passing grade. But if schools, employers, government, and students work together, we can address the debt crisis facing America’s best and brightest young people.
Too many leaders in a position to impact student debt dismiss or deny the seriousness of the crisis. The reality is that borrowing for education is an unsustainable $1.5 trillion, and is creating a permanent debtor class out of the future U.S. workforce. In addition, student debt is taking a psychological toll on students and families. The effects are particularly overwhelming given the sky-rocketing cost of education, living expenses, and slow wage growth. Even in bankruptcy, student loans are the only debts that are not forgiven automatically. At the exact moment when young adults hope to be getting their careers going, the system makes their financial situation as stressful as possible, limiting their career choices and life decisions.
Particularly troubling is that the burden is felt across the economic spectrum, from low-income to upper-middle-income households. Chegg’s own survey of 1,100 adults, aged 18 to 39, found that more than half of borrowers with household incomes over $75,000 were worried about being able to save—even for emergencies. One in three borrowers across all income levels say they forgo payment of other debt to repay student loans. Student debt has also led some students to sacrifice medical check-ups, while others struggle with depression or anxiety. Debt has been linked to suicides amongst young professionals.
To make matters worse, this burden is being carried by a failing system. While over 80% of graduates say getting a job is a major reason for going to college, a Gallup poll found that only one-third of employers feel that college graduates have the skills they need.
Something has to change.
Sadly, the solutions proposed in the current U.S. political debate on student debt miss the mark or offer unrealistic outcomes. New initiatives from all sectors are needed to relieve the burden of debt and help prepare students to thrive in the new economy. One answer is to actively involve employers to help finance their employees’ education, while another is for higher education institutions to cap costs and modernize curriculum to better prepare students for success in the modern workplace.
Now is the time for business leaders to engage in the conversation.
The reasons for CEOs to care about this issue are obvious. Demand for diverse higher-level skills (both technical and non-technical) continues to grow in the tight U.S. job market. Companies benefit significantly from the investments made by students in getting the skills that businesses need. Meanwhile, 2016 research by the International Foundation of Employee Benefit Plans shows that financial stress at work carries far-reaching costs, including lower productivity, increased absences, turnover, and more health care claims. Employers have the power to help alleviate pressures associated with student debt while using loan repayment assistance to attract and retain top talent. Sadly, only 8% of employers offer student loan debt repayment assistance in contrast with more than half of employers who offer tuition assistance for education and training.
To weigh in on this debate, Chegg felt that we should walk the walk. In June, we announced a new program to help our employees reduce their student loan debt by contributing as much as $6,000 annually, focused on entry-level through mid-level managers, in addition to an existing educational benefit of $5,250 for employees continuing education.
In preparing our own program, we found several structural impediments to companies reducing employees’ student debt. While we could get tax relief of up to $5,250 for continuing education for our employees, we could not use that same amount to pay off debt for things already learned. We discovered that money offered to employees for student debt is a taxable benefit. We also saw that those with student debt must earn a wage, pay taxes on it, and then use their after-tax dollars to pay off high-interest student debt back to the government.
All of this makes little sense. College debt should either be interest free or low interest, and students should be given the opportunity to pay off loans with pre-tax dollars. With taxes and interest, it is no wonder that 40% of young people are expected to default by 2023 and 1 million already do so annually. And political leaders can help by changing tax policy to give the best and brightest a raise. Tax relief for businesses and students will help pay off loans and enable more spending on the other costs of living.
By engaging employers in a smarter debate on student loans, the business community can speak with one voice to urge policymakers to pass common sense legislation that will start chipping away at the crisis. Not only will our work on this shape the lives and experiences of a generation of borrowers, but it will lay the groundwork for an educational financing system that is more economically sound and sustainable for the workforce of the future.
Dan Rosensweig is CEO of Chegg.
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