Loan-Forgiveness Program May Attract Millennials to Nonprofit Jobs

Nearly 70 percent of seniors who graduated from public and nonprofit colleges in 2014 had student loan debt, according to the Project on Student Debt at the Institute for College Access & Success. Among those who did, the average amount was $28,950.

Student loan debt is shaping the choices many young Americans make. This trend could cause trouble for nonprofits hoping to recruit talented young people to jobs that often don’t pay as well as those in the private sector.

“The pressure on most students right now is to get a job that leads to money,” says Philip Gardner, director of the Collegiate Employment Research Institute at Michigan State University.

And better-paying jobs may be easier for recent graduates to find this year. In the institute’s annual survey about the college labor market, other sectors — such as health care, finance, and business — reported greater job growth than the nonprofit sector.

But in the battle to attract top talent, nonprofits have one advantage over the for-profit world: Employees at many charities are eligible for the federal government’s Public Service Loan Forgiveness (PSLF) program. Enacted in 2007, it provides a pathway out of education debt for people with certain federal loans who are employed full-time at qualifying jobs, such as teaching or working for a 501(c)3 nonprofit.

Their debt is not forgiven right away. Employees must make 120 payments using a qualifying payment plan, which means they’re eligible for loan forgiveness on their remaining debt balance only after making payments for at least 10 years while working in public-service jobs.

That slow pace is an intentional feature of the program, because it helps charities retain workers for the long term, although they don’t have to stay in the same job for a decade, says Isaac Bowers, director for law school engagement and advocacy for Equal Justice Works, a nonprofit that advocates for lawyers to work in the public interest.

In its annual survey of nonprofit employment practices, the consulting firm Nonprofit HR identified the program as an emerging trend in 2016, predicting that it will entice more millennials to pursue careers at nonprofits due to the economic incentive loan forgiveness provides.

Getting the Word Out

Spreading awareness about PSLF is the first step to using it as a recruiting tool. Most college undergraduates are not familiar with the program, Mr. Gardner says, and he thinks most college career centers do little to teach students about how to access its benefits.

But there’s a subset of students who would be interested in pursuing nonprofit work if they knew more about PSLF, he believes: “There are a solid number of young people who are committed to social issues that encompass a wide range of nonprofits.”

Law school students, on the other hand, are very familiar with the program, Mr. Bowers says. In fact, more than 90 percent of lawyers — most of them working in public-service jobs — and law students surveyed by Equal Justice Works said they would be less likely to commit to, or continue, working in public service without the PSLF benefits.

“Our constituency is law students and lawyers who want to work in the public sector, and my interpretation would be that they see the ability to earn public-service loan forgiveness as vital to making that an economically viable career choice,” he says.

To help with recruitment, then, nonprofits that offer jobs eligible for PSLF should clearly state that in their materials, says Patty Hampton, vice president of talent acquisition at Nonprofit HR.

Educating Employees

Although employers bear no responsibility for helping employees participate in the program, borrowers may appreciate help from nonprofit human-resource professionals who know the law’s nuances.

For example, there’s a relatively new employment certification form that borrowers should submit to the Department of Education when they start a new job and every year after in order to stay on track with their repayment plan, Mr. Bowers says. He encourages employers to provide the form to employees.

And the program has many details that can trip up employees who are not paying close attention. For example, time that nonprofit employees spend in religious instruction or worship does not count toward the requirement to work a minimum of 30 hours per week.

To learn more about the program’s requirements, check out this blog post from the U.S. Department of Education.

An Innovative Approach: Matching Loan Payments

Some nonprofits are going above and beyond to help their employees tackle their student-loan debt.

One recently started offering employees up to $1,000 a year for up to five years to match the employees’ loan payments. The nonprofit, a client of Nonprofit HR that asked not to be named, also offers employees the use of Student Loan Genius, a digital loan-management platform that helps workers follow complicated PSLF program rules and can deduct loan payments from their paychecks.

Ms. Hampton and Mr. Bowers agree that matching employees’ loan payments would greatly appeal to potential workers.

“I think mid-sized to large nonprofits that are able to do it should at least investigate it, because it’s a great retention tool,” Ms. Hampton says.