Student Loan Debt Cancellation

How Can We Avoid Needing Debt Cancellation in the Future? Improving Higher Education Begins With Employers

By Casey Powers, Climb CEO

President Biden’s forgiveness of $10,000 in public student loans is a huge win for students who have long carried debt from an education that has not led to fruitful economic and career prospects. However, the news of this cancellation also showcases a lot of baggage from a higher education system that has not prepared learners for careers in today’s economy — or that at least has overcharged them for the preparation it did deliver.

As we cheer about the easing of this financial burden for 43 million Americans, we must also look toward the future for the next generation, to ensure that this forgiveness is not an act that needs to be repeated 5, 10, and 15 years from now. We have to truly consider how we found ourselves here in the first place, and how we can avoid repeating the same mistakes.

While the causes of higher education tuition increases are complex, one powerful yet rarely discussed solution to this issue is changing the hiring practices at companies across America.

A history of degree inflation

Most examinations of the student debt and tuition inflation problem look at higher education institutions, and the inflation of tuition costs over time. However, we should first consider the reason that institutions are able to charge such high costs without losing student demand for degrees. One powerful contributing factor is the use of “degree requirements” in employer hiring practices.

For example, research from Accenture and Harvard Business School showed that “in 2015, more than 1.4 million people were employed as first-line supervisors of office and administrative support workers. Of those, only about 34% had a bachelor’s degree. However, in 2015, 70% of job postings for this occupation asked for a bachelor’s degree.”1

This phenomenon is not only present in office administration positions. More than 6 million jobs are currently at risk of degree inflation. In fact, in Information Technology (IT)/Communications and Media Publishing, 60% strongly agree or agree that they “reject some individuals who have the skills and experience to be successful in a middle-skills job because they don’t meet the requirement of having a four-year degree.”1

Although many companies still have degree requirements for roles that do not require them, “two-thirds of companies acknowledge that stipulating a four-year degree excludes qualified candidates from consideration.”1

The practice of degree inflation — or requiring degrees for roles that really do not need them — artificially raised the value of that piece of paper in the eyes of the public and of job-seekers. In economic terms, this creates inelastic demand for degrees — meaning that when the price goes up, consumers’ buying habits stay about the same.

This allows education institutions to continue raising prices

Education institutions have been able to consistently raise prices due to the steady demand. However, as prices have risen, not everyone could continue to afford education — which theoretically should have reduced demand. Because populations in low- to moderate-income communities are disproportionately affected by increasing prices, well-meaning programs were continuously developed to help support them enrolling.

These financial aid programs, which were aiming to improve access, have inadvertently supported the growth of tuition prices. A clear example of this is after World War II, when 2.2 million veterans began using financial aid benefits from the 1944 GI Bill of Rights. This increased demand for eligible institutions under the VA bill, and the increased enrollment ended up raising tuition prices for all students. Several other programs over the years have yielded similar results after they were implemented.

Through these programs, people have nearly unlimited access to funding, which enables higher education prices to stay the same or even to rise, while the actual value of those degrees are flat or declining.

New models are emerging — but companies need to be part of the solution

Many institutions have taken a more skills-based approach to develop accelerated pathways that can help learners gain career skills without investing 4 years and $100,000+ in tuition. These programs prioritize career support and focused course pathways, with the goal of helping students see career advancement post-graduation. This newer wave of education programs includes certificates and degree alternatives — many of which are offered through innovative partnerships with traditional degree-granting institutions.

These alternatives have the potential to create competition with degree programs and ultimately drive prices down to make them more affordable for everyone. However, the solution isn’t complete without access to great jobs for graduates of these programs. Here is where changing employer hiring practices comes in — if more employers were to drop unnecessary degree requirements and instead put in the effort to understand the value of these alternatives, more students would have confidence in such lower-cost pathways as a viable onramp to a great career.

There is some cause for hope that recruiting changes are on the horizon. Employers know that these alternative pathways create strong outcomes, and according to a SHRM report in 2022, over 90% of employer stakeholders believe that alt-credential holders perform the same or better than traditional degree holders.2 Many employers like IBM and Accenture have taken steps to pursue a more skills-based hiring process and remove degree requirements from many roles. The momentum certainly seems to be picking up with initiatives like Opportunity@Work’s “Tear the Paper Ceiling” campaign, encouraging employers to look past degree requirements in partnership with the Ad Council. A recent report from Burning Glass Institute — a leader in workforce research — estimated that if these trends continue, 1.4 million jobs could open to workers without college degrees over the next five years.

If more employers, talent acquisition managers, and hiring managers begin to invest in understanding these credentials and work toward skills-based hiring, then alternative career pathways can be further validated. In turn, higher education stands a chance to reduce prices and increase opportunities for more people.

If your company is excited to be part of the solution, click the button below to learn more about how Climb is helping employers hire from alternative pathways!

1 Fuller, J., Raman, M., et al. (October 2017). Dismissed By Degrees. Published by Accenture, Grads of Life, Harvard Business School.
2 SHRM Learning Hour (March 2022). “Making Alternative Credentials Work.” 25:06.

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Key advantages of our approach:

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  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

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