Student Debt: A Problem Nonprofits Have an Interest in Solving

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March 9, 2013; Source: New York Times

Nonprofits trying to recruit new, young professionals know the problem. AmeriCorps may have inadvertently advanced the idea that young people are willing to work in the nonprofit sector for a song. However, people actually need decent incomes and, as we have demonstrated in numerous articles on the NPQ website (such as this one), nonprofits typically underpay at the professional levels.

The student loan debt crisis makes it worse. According to the Federal Reserve Bank of New York, the proportion of 25-year-olds with student debt increased from 27 percent in 2004 to 43 percent in 2012. Add in the factor of unemployment due to the nation’s prolonged recession and it’s no surprise that student loan borrowers who were delinquent on their payments by 90 days has risen from 10 percent in 2004 to 17 percent in 2012.  The Fed study also indicates that nearly one out of five people with student debt have debt burdens of $25,000 to $50,000 and some four percent carry debt of over $100,000.  Monthly debt payments consume sizeable chunks of the borrowers’ income.

If the nonprofit sector is going to be able to replenish its ranks with committed young people who don’t want to follow a Gordon Gekko-like path but yet still want to earn a decent living with a career in the nonprofit sector, shouldn’t nonprofits be geared up with policy solutions for the student debt problem? Isn’t the ever-increasing student debt crisis one of the issues that the nonprofit sector, no matter what its internal ideological divisions, should be able to come together around to fashion a comprehensive, bipartisan, collaborative menu of solutions?

Have you and your nonprofit encountered the challenge of hiring young people with the burden of large student debt balances? What would you and your nonprofit recommend as components of the student debt crisis solution? —Rick Cohen

  • Barbara Dudley

    University students in Oregon have come up with an innovative and common sense proposal for debt free higher education. The essence of the ‘Pay It Forward’ plan is that it provides a tuition free, debt free public higher education to Oregon students who, in return, agree to pay into a state higher education fund a small, fixed percentage of their adjusted gross income for a set number of years once they have finished their college education.

    The idea emerged from a Senior Capstone class at Portland State University which was looking for solutions to the student debt crisis and came upon this proposal from the Economic Opportunity Institute in Seattle. The student group partnered with Jubilee Oregon and the Oregon Working Families Party to develop a legislative proposal which was presented by the class to a panel of legislators last December. It was well received and is now a bill, HB 2838, sponsored by the Oregon House Committee on Higher Education.

    The Pay It Forward plan builds a higher education fund to cover tuition costs of future students, a fund which will become self sufficient over time. However its success depends on two elements: First, the State Legislature must not reduce its share of the cost higher education which already shockingly low. Oregon ranked fifth-lowest in the nation for the amount of public support it provides students, according to a report by the Association of State Higher Education Executive Officers released last week. Secondly, there will be a need for upfront funding which will be accomplished through bonding as well as contributions from philanthropies and businesses in Oregon who will hopefully see it in their interest to help eliminate the scourge of student debt by seeding the fund both with contributions and by buying bonds.

  • Allesandra Lanza

    There is an existing solution to this problem – federal student loans (which are the majority of outstanding student loans today) are eligible for income-based repayment, a program that was specifically designed to ease payment for borrowers with high debt and low income. Better yet, many nonprofit careers qualify the borrower for Public Service Loan Forgiveness, which forgives any remaining federal student loan balance after 10 years of income-based repayment. The real problem is that not enough people know these payment programs exist and the application process is often cumbersome. My nonprofit employer, American Student Assistance, helps borrowers navigate all their payment options and we’ve long advocated that neutral, objective counseling should be available to all borrowers in the federal student loan program. That would go a long way toward solving the student debt crisis.

  • Aaron Sanderson

    As the beginning of this article began to note, the issue is not the income-to-debt ratios of would-be hires, it is our sectors longstanding struggle with compensation commensurate with value-added. For too long have we helped perpetuate the stereotype that one ought to accept less in compensation because they choose non-profit. Define your expectations, know the value of the role to your organization, and compensate fairly.