Tuition Tuesday - Student Loan Debts & Past Due Rates Increasing

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.

Tuition Tuesday - Debt, Compensation, and an Uncertain Future

Third post in this multi-part series on increasing college tuition, with a special emphasis of course on the impact on the design professions. Today’s topic is about the growing disconnect between tuition and salary.

The statement that “there is no money to be made in architecture or design” has long been shared with students, and unfortunately in many cases accepted as fact. For many years, issues of unpaid and underpaid internships caused significant hardship within the profession. Over the last 15 years however, the profession has done an admirable job of nearly ridding itself of the practice - with some exceptions - and recognizing the contributions of young staff. In the most recent DesignIntelligence Compensation & Benefits survey, the mean annual salary for year 3 interns, just finishing IDP, was $44,750 plus a mean bonus of 2.7%. A big jump from 1996 when DesignIntelligence reported a mean salary of $28,760. In fact this growth even beat inflation.

So the good news is, we are slowly making strides in what we pay recent graduates and interns. The not so good news, the cost of education is greatly exceeding these gains. According to the College Board, tuition and fees at public universities have surged over 130% over the last 20 years. At the same time, the maximum amount of government-subsidized loans that a student is eligible to receive for a four-year degree has remained $23,000 since 1992

Median income has remained roughly the same since 1988, while tuition and fees has more than doubled. Source: CNN Money

This post isn’t meant to argue that recent graduates and interns are underpaid - we can save that discussion for another time. However, what is increasingly apparent is the disservice to recent graduates who spend thousands of dollars to get college degrees, and then find themselves in a work force which doesn’t compensate accordingly. A push towards increasing the value and relevancy of the degree is necessary, and requires a joint effort between the academy and professional practices. Then perhaps the conversation can become more about value and less about cost. By recognizing value-in (tuition) and increasing value-out (relevancy), we can grow our profession in more sustainable ways, and support the next generation of leadership.

What Are You Doing About Talent Today?

In these times of uncertainty, staff reductions, project cancellations, and clients demanding more for their dollar, what have you done to assure the happiness of your existing talent? The staff who have made it through cuts at your firm are likely among your most valued — that’s why they are still there. But what have you done to be sure they will still be there in the future?

In many organizations today, there are talented people who aren’t happy in their current roles. If the economy had continued to grow at a “normal” pace, they likely wouldn’t be working for you any more. However, because of the downturn, job security has been of utmost importance: Better to have a job you don’t like than not have a job at all. However, once the economy begins to turn, these people will leave at the first opportunity. In some cases it is already too late. Your only option is to encourage their professional growth, and maintain touch with them in coming years in the hopes they may someday return. In other cases, there are opportunities for you to re-energize their passions and talents around the future of your firm. I believe there are three winning strategies to keep these talented staff within your organization:

1. Be very clear with them about their future. With the future as fuzzy as it is, this may be uncomfortable. Times and situations do change. However, if you see people as future leaders in your organization, make sure they know it. Often times, leaders assume their most talented staff know they are valued and have a place in the future vision of the firm, yet this isn’t communicated. Set a clear path for them and provide them the training and development opportunities necessary to grow into the roles you see for them.
2. Embrace the power of mentorship. In the booming economy, senior leadership and key players within your firm were traveling quite frequently — often globally — and have the frequent flier miles to prove it. Now, many leaders are traveling much less, often as a cost-saving measure or perhaps the workload and client opportunities don’t necessitate the travel. This means the leaders in your firm — the talented people who have driven it to success — are now in the office. They have time to sit with younger staff and mentor them. Take younger staff to meetings with clients or community groups that you weren’t attending before. A quick coffee or lunch that wasn’t possible before because of travel is now a chance for mentorship. Senior leadership has a great opportunity today to prepare young leaders for the future.
3. Develop a meritocracy culture. Now more than ever, it is important to reward people for their contributions to your practice, particularly the most talented individuals in the firm who you hope to build your future practice around. Be upfront about your expectations and values and follow through by rewarding those who exceed them. If you challenge your staff to reach for new levels of service, expertise, and design quality you will motivate your stars to shine. This is particularly true for your younger staff. They want very clear expectations and clear outcomes. A challenge for any firm certainly, but those who believe in meritocracy will find great success.

Today’s professional practices require that we develop talent and teamwork both as individual skills and organizational capabilities. It is important to note that these strategies will help you retain and recruit all talent within the organization, not just those who aren’t happy. Firms and leaders who provide mentorship and focus today will be best positioned to win the war on talent tomorrow.