Skills Over Degrees? What Employers Can Do to Tackle the Student Debt Crisis

After a three-year hiatus, federal student loan payments are back.

Roughly a quarter of America’s workforce — 43.5 million people — carry student loan debt. Collectively, this group owes more than $1.7 trillion, or an average of nearly $38,000 per person.

While the country debates the merits of student loan forgiveness, we are ignoring a more fundamental question — how do we help people avoid student debt to begin with?

Ask anyone who has been saddled with student loans — they can be crippling and life-altering. I should know: Student debt changed my life.

When I was 17, I was forced to drop out of college at New York University (NYU) because a scholarship I earned ended up falling through. I owed NYU $26,000 — a debt I could not repay — and the school would not release my transcript until I paid them back.

I was stuck.  I had to pause college and figure out what to do with my life, which was now disrupted. I took jobs in retail, food delivery, and restaurants to emotionally and financially get back on my feet while I figured out what came next. Eventually, I was able to take out a loan (and, with it, more debt) to get my transcript released at NYU. That allowed me to restart my pursuit of a degree at a new school, the University of Colorado.

In the end, it turned out alright.  I’ve built a successful career in business, but my path required serendipity, a true detour, and many other variables. The specifics of my journey are unique — but the upshot is not unique at all. Debt changed my path and affected decisions I needed to make just as it does for millions of Americans every year.

Many people experience student loans not just as a financial barrier but as an obligation that changes their behavior and rewires their motivations — including their career path. I saw it myself — and also see it today in my current role as a chief opportunity officer, where I’m accountable for driving economic mobility for my company’s external learners and members, as well as our employees.

When my company surveys the learners we work with, we often hear two things. First, that experience with student debt is a blocker that makes them leery of more programs. Second, that they are motivated to add skills and complete education if they know their employer is funding it.

Employers can play an increasingly critical role in student debt avoidance by funding the learning and education of employees. On top of the direct impact of helping employees to avoid student debt, there’s tremendous business value. Employers can tap into new talent in their workforce, support employee engagement and confidence, and improve agility within their business.

Here are specific ways that employers can play a meaningful role addressing student debt:

1. Hiring based on skills: While degrees and credentials are important for some roles, employers can start by making sure they’re clear about why certain roles require potentially expensive degrees and, where they can, removing degree requirements. Doing so allows employers to tap into a wider pool of candidates — and gives candidates the opportunity to build their careers without incurring debt in the first place. Once they’re in a role, they can focus on certifications and education they might need to advance their careers.
2. Supporting employer-backed education: Along with supporting skills-based hiring, employers can support their employees’ growth (and propel their own business needs) by funding employee education programs. This allows working adults to add skills while maintaining their ability to earn — and do so more easily — with employer-backed tuition. While there’s long been a tax benefit for employers providing tuition reimbursement, designing such programs to support all corners of your workforce, focusing on the most marginalized first, will allow more participation. And that will help prevent student debt in the first place.
3. Helping mitigate debt: The Biden administration is right to do everything it can to mitigate the burden of existing student debt — and employers can provide similar support. There are different models, but employers who want to address student loan debt can provide either a direct payment toward an employee’s student loan or allow discretionary benefit dollars to go toward it. (The US Chamber of Commerce shares a number of ideas on how it can work here.)
4. Showing clear pathways: One thing I have learned: Experience and struggle with student debt makes you acutely aware of your return on investment. One way employers can help with student debt is with simple education — making career pathways, and what’s needed to achieve them, as clear as possible. Doing so can prevent employees from pursuing programs that cost them money but are unlikely to help them advance their career.

While the Biden Administration continues to push forward new plans to address debt payments, these steps can help employers support their workforce — and drive solutions that don’t simply eliminate existing debt but prevent new debt altogether.

Terrence Cummings is Chief Opportunity Officer at Guild.