Educational Debt and Nonprofit Employment
How to retain and nurture employees in the face of growing financial challenges
By Kristi Wooten
According to a new study titled “Understanding the Next Generation of Nonprofit Employees: The Impact of Educational Debt,” conducted for the Building Movement Project (a New York-based strategic alliance working for social change by developing and inspiring movements within the nonprofit sector), three out of four recent college graduates who take jobs with nonprofits have student loan debt.
The study included the following key findings:
1.Graduates who have accepted jobs at nonprofit groups are more likely to have borrowed to finance their education than graduates who go to work for the government or a private business.
2. Nonprofit workers tend to pay off their student loans more slowly than workers in government and private business.
3. The average amount of debt incurred by all college graduates has grown by more than 64 percent since 1993.
While it may not be surprising that the starting salary for a recent graduate in the private sector was $37,008 in 2001 compared with $25, 825 for a similar position in the nonprofit sector, (primarily because, with the exception of the education and healthcare fields, nonprofit salaries have traditionally trailed those in the private sector by a consistently wide margin), what is eye-opening about the Building Movement Project’s findings is the fact that 75 percent of graduates who chose work in the nonprofit sector have educational debt, compared with only 63 percent of their for-profit peers.
While statistics specific to Georgia were not released as part of the study, it can be assumed that the statewide average for the percentage of nonprofit employees carrying student loan debt is equivalent to the national average of 75 percent, with Atlanta metro averages possibly even higher, due to the number of nonprofits in the city that hire junior executives directly from some of the U.S.’s most prestigious (and therefore, more expensive) undergraduate and graduate programs and institutions.
The study also lists the average student loan debt total across all sectors as around $19,000 for those graduating in the year 2000, with an average debt burden of about 8 percent of the monthly income.
While 8 percent of a recent graduate’s new salary is considered a manageable amount to pay on a monthly basis (based on standards in the home mortgage market), the study did not include other forms of debt, such as credit cards, car loans, or bank loans.
Yet 8 percent of an employee’s monthly income can impact daily life, which is why Lena Carstens, the newly named managing director of Dad’s Garage Theatre Company in Atlanta, says she and her husband, who also works in the nonprofit sector, have altered their daily routines to include “less going out to eat,” “more entertaining at home” and a “clarification of priorities and values.”
Carstens appointment at Dad’s Garage is an exciting footnote to the final months of a two-year mentoring program she began in 2004 with Theatre Communications Group (TCG), a national theatre organization committed to strengthening and promoting American not-for-profit theatre.
As one of only 35 recipients to take part in the Duke-and-Mellon-Foundation-funded New Generations Program since its inception in 1999, Carstens received a $65,000 grant (over two years) and a provision of up to $15,000 toward her educational debt.
And while the debt relief portion of her grant and stipend helped wipe out some of the tuition expenses Carstens incurred while obtaining two masters degrees at Southern Methodist University in Dallas, her current total educational debt of $47,000 (with a monthly payment equivalent to between 8 and 9 percent of her income throughout the life of her loan) will mean that the 27-year-old won’t be finished paying off her student loan debt until she’s 51 years old.
Still, Carstens says, she, like many recent graduates now working in the nonprofit sector, knew where her career and her potential earning power were headed long before she accepted her current job.
A graduate of Webster University’s prestigious Conservatory of Theatre Arts program, Carstens’s plan always included a future in the nonprofit sector. And she says she couldn’t be happier with the choices she’s made.
“I love what I do. I really, really love my job,” Carstens says. “I have [friends in the for-profit sector] who make a lot of money and feel empty. Not me! I’m full.”
Carstens attributes some of her satisfaction to the encouragement and knowledge base she received from her TCG mentor, Alliance Theatre’s managing director, Thomas Pechar. Yet she says that the challenges of her new role as managing director at Dad’s Garage, as well as support from a dedicated and fully engaged board of directors are the important factors that will keep her at her job in the long-run.
Carstens’s feelings of satisfaction are not only crucial to her development as a nonprofit executive, but also are indicative of the attitudes of many recent graduates entering into the sector, according to the Building Movement Project’s Study:
“Graduates working in the nonprofit sector and government reported higher levels of satisfaction on questions related to the substance of their work, such as, ‘Do you feel your work is important?’ and, ‘Do you use your educational training at work?’
Graduates entering the nonprofit sector were also more likely to say their job closely related to their undergraduate field of study.”
Higher educational debt rates among nonprofit workers, the study postulates, may be due to the fact that a higher percentage of potential nonprofit executives pursue graduate degrees or that many graduates from low-income families pursue work in the nonprofit sector in order to “give back” to the community.
As baby boomers face retirement, the nonprofit sector is faced with the quandary of keeping its junior executives happy in order to retain those workers long-term. And while higher starting salaries may be out of the question, other financial incentives – such as funded programs or grants to assist with educational debt – are becoming more and more popular.
Yet the retention of workers must rely more upon “the connection between the employee and the nonprofit employer’s mission,” says Tom Darrow, principal partner of Talent Connections, an Atlanta-based nationwide recruitment and human resources firm that helps place employees in jobs in the nonprofit sector.
“A nonprofit is different from corporate employment at the core in that the organization has a “do-good” mission that doesn’t involved maximizing profit. So the junior employee has a high need to want to support the organization’s mission regardless of compensation opportunities elsewhere.
Darrow says it’s all about matching the employee to the mission and the position.
“Nonprofits typically do a terrible job of hiring staff who are the right fit. They don’t define the job and sell the job well, don’t source for candidates far enough to ensure the best pool and they don’t do a good job of assessing fit. Bringing in the right talent will solve many of the retention, morale, and employee relations issues after day one. “
When it comes to what nonprofits can do to bridge the gap between financial compensation and a nonprofits worker’s desire for satisfaction, Darrow and Carstens agree that challenging and rewarding an employee can be one of the most effective means of support an organization can provide.