Can student loan repayment attract young workers to financial industry?
If you’re a young worker with tech skills looking to get started in a career, and you have a pile of student debt keeping you up nights — it might be a good time to take a closer look at opportunities in the financial industry.
Banks and financial institutions are competing to hire qualified candidates with a strong background in technology. And to sweeten the offer, some financial employers are offering an attractive new benefit by helping employees pay down their student loan debt.
A January article in American Banker magazine notes that many young workers who a few years ago might have pursued financial careers have gravitated toward leading tech companies and start-ups. But while Silicon Valley giants are tendering attractive starting salaries to top performers, banks and financial institutions that offer student loan forgiveness programs may start looking more competitive as employers.
“Tech startups are flush with benefits, but they may not be the most meaningful: things like free beer, snacks and ping pong tables,” Meera Oliva, chief marketing officer for California-based student loan repayment solutions company Gradifi, tells American Banker. “That’s all good, but it doesn’t have the impact on your life like paying down a student loan. Banks have an opportunity to be a differentiator because this benefit hasn’t really caught on yet in the tech industry.”
According to the Pew Research Center, student loan debt in the United States topped $1.3 trillion in 2017, more than 2.5 times the total of a decade ago, due to more Americans attending college and rising costs for tuition and other education costs. Among adults 18 to 29, nearly four in ten (37%) owe student loans, with a median debt load of $17,000.
While most studies suggest the benefits of a college degree outweigh the costs over time, in the form of higher earnings and improved opportunities, such heavy debt loads can still put young workers on a difficult footing at the start of their careers.
Moreover, those debt loads may be hindering young workers when it comes to making career choices and pursuing their dreams. For example, the U.S. Small Business Administration has charted how heavy debt burden for college educations appear to correlate with lower levels of entrepreneurship and self-employment among millennials, as Project Invested explored in a previous article. That suggests that innovative approaches to accelerate the retirement of student loan debt would go a long way toward freeing up the human capital needed to boost the economy.
In fact, student loan forgiveness programs are still a relatively uncommon benefit among U.S. employers, particularly in the private sector. But such programs have gained ground in recent years in the public service sector, such as government agencies and non-profit organizations, where options for higher salaries may be bounded by established pay scales and limited resources. Student loan repayment benefits have been a popular option to make careers in teaching and health care more attractive, for example.
A 2015 survey of young workers found that nearly half (49%) would prefer their employer to offer a benefit program to help them reduce their student debt over a 401(k) retirement plan, at least in the early part of their careers.
Private sector employers are looking more closely at those results to determine how they might better appeal to workers of the millennial generation and following. With a tightening labor market, recruitment and talent acquisition become critical priorities for industry. Those with tech skills may be particularly in demand among banks and financial institutions as the industry pursues new fintech solutions and works to boost cybersecurity to protect clients and investors. Student loan repayment could be a valuable benefit that encourages young workers to take a closer look at such opportunities.
On the employer side, financial industry leaders should recognize that student loan repayment programs are one promising way to attract younger workers, but they should continue to look for other ways to appeal to rising generations. Author Dan Schwabel, who writes on youth employment trends, argues in a May 2017 article for CNBC that millennials are attracted to the tech industry because it’s perceived as creative, innovative and flexible. Banks and financial institutions should be striving to create a similar perception for their industry, Schwabel says.
“Companies would be wise to offer flexible schedules and telecommuting options in order to attract and retain high-potential employees,” Schwabel suggests. “A lot of elite workers I’ve talked to would even sacrifice pay to have more control over when and where they work. By offering more flexibility, giving back to the community, and fostering a culture of innovation, they can better compete for high potentials and steal them back from tech.”
