American companies are increasingly realizing that they, too, can play a role in tackling the mounting student debt crisis. Companies like Aetna, PricewaterhouseCoopers, Penguin Random House, as well as our own organization Chegg, have begun offering student loan debt relief as part of their employee benefits and wellness packages.
In 2019, 8% of employers offered repayment assistance of some kind, up from 4% in 2018. With outstanding student loans at $1.5 trillion by the end of 2019, and 11% of that more than 90 days delinquent or in default, more mainstream adoption of such programs can’t come soon enough.
Employers would also do well to consider another benefit of such repayment programs: boosting diversity.
The psychological and financial impacts of debt are clear: Consider the anxiety it places on young Americans as they juggle other monthly payments. Or the way it forces many to defer investments, like buying a home, that will grow their future wealth.
This burden falls most heavily on African-American students and their families, who often must take on more debt for the same degree as their white peers. In 2016, for instance, 85% of black graduates held debt compared to 69% of their white peers, according to The Center for Responsible Lending.
And while the average white male student borrower pays off 44% of his balance within 12 years, according to a recent Demos report, 55% of black male borrowers and 45% of black female borrowers default on a loan within that same period. The report points to a similar disparity gap in default rates between Hispanic or Latino students (35% for both women and men) and their white peers (21% for men, 20% for women).
The long-term impact for black families is profound: While a white family with a bachelor’s degree holds $400,000 in net worth, a black degree-earning household holds about $68,000.
Businesses have experimented with a whole range of initiatives to make their workforces more diverse—from creating safer, more hospitable office cultures to broadening recruitment beyond employee referrals. But employers are missing what should be an obvious opportunity if they fail to offer more robust debt relief benefits.
In a recent op-ed for the Detroit Free Press, Kim Trent rightly acknowledges college as an “indispensable” engine for racial equality—the most effective means by which students of color, particularly those from low-income families, move into the middle and upper middle classes. But, as she notes, today that pursuit comes at a punishing cost. Black families are more likely to borrow for higher education, and more likely to borrow more than white families. And though they attend college at somewhat lower rates, 31% of black families have student loans versus 20% for white families.
The reasons behind this gap are complex—a combination of the persistent racial wealth gap and continued discrimination in hiring practices. But whatever the underlying cause, American businesses must heed the result: Black students, entering college with fewer resources, are more likely to enter college in greater need of loans and vulnerable to predatory practices while, at the same time, have trouble securing the kinds of jobs that will help them come out from under the resulting debt.
While most employer-sponsored debt relief programs are likely attractive to many new hires, for the reasons above, such programs could have a particularly strong impact on black graduates. And such benefits could better attract young black graduates, in turn, helping to build a more diverse workforce.
Contributions from their companies will both reduce their monthly bills and, ideally, help them avoid taking on additional debt by enrolling in professional degree programs—a move a disproportionate number of black Americans, according to a recent paper from the Roosevelt Institute, do to make themselves competitive as applicants.
Employers, too, stand to benefit. Maintaining a diverse workforce is essential to greater employee engagement, innovation, and performance. Moreover, it has become a critical part of attracting talent—as millennial job-seekers increasingly rank diversity as a factor in jobs they pursue. The short-term cost of helping pay down the loans of new hires, in other words, may be repaid many times over. A case study from The Hollywood Reporter suggested that student loan debt is a major factor preventing minority graduates from entering and advancing in the entertainment industry—and that companies like ICM Partners and Hulu have begun offering student loan assistance as a way of attracting more diverse candidates.
Employer assistance on loan repayment will not solve the student debt crisis on its own, nor will it be the magic bullet in bringing much-needed diversity in the workplace. But it is a concrete, eminently achievable step that, if well-advertised, may also help raise awareness of the severe impact of education debt on young Americans—and the particularly unfair burden it places on African-Americans.
Kristal Cobb is manager of diversity and inclusion at Chegg.
John Fillmore is chief business officer at Chegg.
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