UP FRONT: Student debt weighing down regional economy

Posted on Jul 1, 2015 :: Up Front
Andrew Schaick
Posted by , Insight on Business Staff Writer

JIM GOLEMBESKI KNOWS all too well that student debt is a two-sided coin.

On one side, it can help position a student for a long and productive career in a rewarding field. Unfortunately, if the right choices aren’t made and it’s not managed properly, it can act like a shackle, delaying not only their entry into a career of choice but also from purchasing items such as a home or car.

It’s potentially crippling to the regional economy.

“Student debt is not necessarily a bad thing if you come out the other side in a career that enables you to pay it back,” says Golembeski, executive director of the Green Bay Area Workforce Development Board. “It’s the skills mismatch that is the problem.”

And it’s a problem that’s growing. It is also a contributing factor to the challenges employers are having finding enough skilled employees to fill the vacancies they have.

By 2021, more than 11,600 jobs will go unfilled in the regional economy because of the skills gap between graduates and what employers need, Golembeski says. Not only is there a skills mismatch, but the debt load often prevents those graduates from additional education for those unfilled jobs, hurting both the workers and businesses.

“That means lost business and no economic growth,” he says.

Golembeski recently took part in a presentation on the impact of student debt sponsored by We Are HOPE Inc., a nonprofit workforce organization serving workers and businesses in Northeast Wisconsin. The group surveyed recent college graduates about how much student debt they have and how it is impacting life and career choices.

What they found was that nearly half — 49 percent — of the graduates they interviewed left school with more than $30,000 in debt. More than half — 55 percent — had monthly payments of more than $200 a month or more. (Click here to view student debt graph.)

It’s not a problem unique to Northeast Wisconsin. Nationally, outstanding student loan debt now stands at more than $1 trillion, rising nearly as fast as the cost of college tuition, which increased more than 1,120 percent from 1978 to 2012.

Solving the challenges posed by the growing student debt load and the skills mismatch will take a collaborative effort involving the K-12 education system, the technical schools, traditional colleges and the business community, says Sandra Duckett, executive director of We Are HOPE.

“This issue is part of the sluggishness of the economic recovery,” Duckett says. “If a student doesn’t know what they want, we need to help them find their career path before they go to school and borrow the money.”

Many of the region’s colleges have stepped up their education efforts about the financial and legal impacts of borrowing money to pay for school.

The University of Wisconsin- Oshkosh launched a financial literacy pilot program in the fall 2014 semester to help students better understand credit and budgeting both during school and for post-graduation.

“We did it for all the incoming freshmen. We tried to plant those seeds,” says Kim Donat, director of financial aid at UW-Oshkosh. “We want them to see the real costs of borrowing and get an idea of the responsibilities.”

Like Golembeski, Donat’s not sure it’s the debt alone that’s the problem, rather the challenges of aligning student debt with opportunities in the economy. “There is no magic bullet to the problem, but students do need to understand this is an obligation.”

While it has not launched a formal program, UW-Green Bay has stepped up its efforts to educate students about debt and their obligations. That information is part of freshman orientation and involves educating the student’s family as well, says Sue Steeno, assistant director of financial aid at UW-Green Bay.

Even UW-Fox Valley, one of the lower cost options in the state college system, initiated a program in conjunction with Prospera Credit Union to better educate students and families about using loans to finance a college education. The four-session primer, Financing a College Education: The Entire Process, will be offered through the college’s continuing education program this fall.

“It’s a time in life that really fits well with our LIFEstages concept,” says Kristi Flores, marketing director for Prospera. “It’s important to get a good start to this stage.”

While the colleges are trying to make sure students understand the strategies and consequences of borrowing to pay for school, groups such as We Are HOPE will also be working with the K-12 systems to help match student career interests with career options — including those that do not require a traditional college education.

“We formed the Northeast Wisconsin Manufacturing Alliance to change the perceptions about working in manufacturing,” Golembeski says. “We may need to use that same model to change that perception that a college degree is the only career path.”