Original Article by: Bloomberg News
State and local governments are joining some private and nonprofit companies in capitalizing on graduates’ concerns in a sluggish economy about repaying their student debt to attract new residents, talent and consumer dollars. Outstanding loans total about $1 trillion, topping U.S. credit-card debt. In Kansas, the perk has attracted 411 applicants representing 33 states, according to Chris Harris, who manages the program for the state Commerce Department in Topeka.
Among companies, Tenet Healthcare Corp. (THC), which owns or operates hospitals and health-care facilities across the U.S., promotes loan-repayment incentives in its job ads. Some of the Dallas-based company’s facilities started offering the perk in 2003.
Students in health professions often graduate with high debt burdens, making companies with loan-repayment plans especially attractive. Physician-recruitment company Cejka Search Inc. has seen health-care providers, including St. Louis- based BJC Medical Group, begin to offer repayment plans in compensation packages for physicians in the past few years.
Kansas allocated $1 million for the first year of its program, which applies to 50 rural counties that have seen a 10 percent population drop since 2000. The guidelines for the Kansas program were designed to be as broad as possible. Graduates with associate’s through post-graduate degrees can qualify for the program, which spreads payments out over five years. Applicants must have established residency in a qualified county after July 1, 2011.
The city of Niagara Falls, New York, offers a loan repayment plan to attract young people, and Nebraska looked into creating one, partly out of concern that the Kansas program would lure college graduates across their shared border.
More than half of Nebraska’s 93 counties have lost more than 5 percent of their populations in 10 years, according to the last census. The state considered offering $7,500 over five years to student debt holders who moved into those counties. Budget concerns kept the legislation from moving beyond the Senate Revenue Committee in its most recent session. The Holt County, Nebraska region saw an almost 10 percent drop in its population between 2000 and 2010, while neighboring counties lost as much as 22 percent in the past two decades.
A loan-repayment bill is likely to come before lawmakers again, and it is expected that some companies themselves will offer similar perks while they wait for Nebraska to act. College undergraduates from the class of 2010 on average left school with $25,250 in student loan debt, according to The Institute for College Access & Success in Oakland, California.
Loan repayment programs are a smart incentive because a similar program specifically for dentists, physician assistants and other medical professionals has attracted workers to Nebraska since it began in 1994.
Student-loan assistance is more common in health care than in other professions. Thirty states and Washington, D.C. have repayment or consolidation plans for dental or medical workers, according to a 2011 American Dental Association report. Several private health-related companies also offer the incentive.
For years, physicians and other medical workers could apply for loan forgiveness for serving communities in need through the National Health Service Corp. The private employer programs that Cejka deals have no ties to government jobs.
In an annual retention survey by Cejka Search and the American Medical Group Association, 35 percent of medical groups surveyed had offered loan repayment to candidates in the past year, and they included it in about 25 percent of packages.
David Knocke, president of BJC Medical Group, said the plan helps draw and keep people in high-demand primary-care positions in rural areas -- and the deal works out for everyone. The time is ripe for more employers to use debt repayment to attract talent, said Paul Combe, president of American Student Assistance, a debt-counseling nonprofit company.
Since 2006, Boston-based American Student Assistance has offered full-time employees as much as $2,400 a year for loan repayment, while part-timers can get a smaller benefit. The program had 71 participants in 2011. Combe attributed high employee retention partly to the program, citing the company’s 12 percent turnover rate compared with the 16 percent average for the Boston area.
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