2 notable reports this week already regarding the impact that economic conditions are having on various types of credit (mortgages, credit cards, student loans, etc.), both from the Wall Street Journal and the Federal Reserve Bank of New York.
The first, from the Real Time Economics blog, shows that while U.S. household debt has declined 8.64% since it’s peak in the 3rd quarter of 2008 to $11.42 trillion, student loan debt is up sharply, rising 25% over the same period. This increase from $440 billion to $550 billion might be reflective of more people going back to school in the hopes of increasing their skills and value in a difficult job market. The report doesn’t indicate the reason for the increase, however the drastic increase certainly will affect future spending and compensation expectations. The graphic from this report showing this change is below:
Monday’s news was followed yesterday, by another report showing a steady climb in delinquency rates of student loans. The article says, “11.2% of students loans are more than 90 days past due”, and the delinquency rate steadily increasing. Credit cards are the only type of loan with higher delinquency rates, however those numbers have been declining for the last year.
We’ve set up an educational system - and an employment system - that requires students to take on incredible amounts of schooling, and in many cases the associated debt. It impacts the diversity of our profession and the economic condition of employees of every professional practice in the country.
The question for leaders of professional practices is simply this: Do you know the cost of education at the institutions you typically recruit from? If so, do you know the associated debt load or student loan payments made by graduates coming from that institution to your firm?
Once you know this information, the opportunity is to develop unique strategies for recruitment and retention that help minimize the pressure these individuals feel financially. As competition remains high for talented, committed employees, helping your youngest professionals and recent graduates can lead to significant increases in loyalty and retention. And that, is one of the best investments your practice can make in today’s economy.