🔒Loan overload

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The Federal Reserve Bank of New York reports that student debt has climbed to $904 billion in the first quarter, a debt load that is being blamed for everything from lagging first-time home sales to a spike in depression among college students. The increase is due, predictably, to steep college costs, cutbacks in financial aid and a weak job market. Student loan debt now exceeds what Americans owe on credit cards or auto loans.

Maine should take note of the coming storm. This year the nonprofit Project on Student Debt ranked the state second in the nation, with Mainers shouldering an average of $29,983 in student debt, after only New Hampshire, at $31,048. The national average stands at $25,250. According to the report, 68% of Maine students went into debt in 2010 for their bachelor's degree.

But there are ways the business community is stepping up to help employees reduce debt, including tapping the underutilized Opportunity Maine tax credit, expanded during the last legislative session, and creating in-house tuition reimbursement programs that can reduce turnover and foster the kind of skilled staff that keeps a business competitive.

“I'm extremely concerned about student debt, mostly as an American issue,” says Wick Johnson, president of Kennebec Technologies, a precision manufacturer in Augusta. “I personally think an education is the most important thing any individual can get.”

When he was in college, Johnson's parents paid for his education so he could start his life debt-free. Johnson says he benefited so much from that opportunity that he feels compelled to offer it to his employees. For the last 30 years, Kennebec Technologies has reimbursed employees for tuition and other training to the tune of about $12,000 a year — a fraction of the company's $10 million annual revenue and an expense Johnson says pays dividends in loyalty, motivation and innovation.

Some of his 65 employees have used the tuition reimbursement program several times, for associate degrees, bachelor's degrees and master's degrees. A few of them have taken their free education and moved on, but most stay with skills and initiative that he says have kept Kennebec Technologies afloat.

“A lot of people complain about lack of education but from my point of view you have no right to complain unless you're continually training [your staff],” Johnson says. “How can you expect a state or anybody else to invest in education if you don't value your own employees enough to invest in them?”

Johnson says his tuition reimbursement policy helps keep turnover at Kennebec Technologies very low and that his young employees are able to focus better at work because they're not worrying about student debt.

Brian Beach, a 22-year-old machinist at Kennebec Technologies, has been reimbursed for an associate degree and a bachelor's degree in technology management, which has allowed him to move from an entry level position washing parts in the finishing department to a job that allows him to work all over the company, including in internal auditing and managing the shop floor.

“I feel as though it gives me a jump,” Beach says. “I learned a lot of things within the school. And when I can come back here and take my education and directly apply it to a practical business, it means a lot to me.”

New laws

Seth Berry, the Democratic representative from Bowdoinham and a former middle and high school teacher, became concerned about school debt after watching some of his former students struggle to pay off loans he says are twice what he graduated with in the 1990s. To help students, Berry co-sponsored a bill with Rep. Gary Knight, R-Livermore Falls, voted into law during the last legislative session, to expand the Opportunity Maine student loan tax rebate.

Launched in 2008, the Educational Opportunity Tax Credit, commonly referred to as Opportunity Maine after the nonprofit that promotes it, offers associate or bachelor's degree holders who graduated in 2008 or later a tax rebate annually for their student loan payments, up to that year's average in-state tuition and fees in the community college or the state university systems.

And there's a piece here for businesses: Companies that pay their employees' monthly loan bills can get a dollar-for-dollar refund on their taxes. So if a business spent $6,000 one year paying off an employee's student debt, it could get a $6,000 refund from the state. (See “Opportunity ME tax credits” on page 28.)

Johnson of Kennebec Technologies hasn't used the Opportunity ME program because it's tuition, not loans, the company is paying for, but says he's open to using the state program if employees qualify for it.

The bill co-sponsored by Berry allows graduates of STEM programs (science, technology, engineering, and math) to receive a refund check for the amount they pay down their student loans annually, even if the Mainer graduated from an out-of-state institution. The intention is to attract skilled workers in science and technology sectors critical to Maine's future.

“If we don't act I think it certainly portends great ill for our economy and our future quality of life,” Berry says of student debt, which he describes as a bi-partisan concern in Augusta. “But by building on the Opportunity Maine Program ... I think we can really make Maine more competitive and give our business and our young people the edge that they need to compete.”

Rob Brown, executive director of Opportunity Maine, spends his time meeting with businesses around the state to get the word out about the program. There's apparently a lot of ground to cover — only 270 people claimed the credit in 2010, the most recent data available, for an average credit of $497. According to Brown, no businesses have yet taken the credit because few employees graduated in 2008 or later and, since the program lacks a marketing budget, many business owners don't know the credit is available.

Brown, who worked his way through courses at the University of Maine and the College of the Atlantic but who did not graduate, advocates a tough-love mix of fiscal responsibility on the part of borrowers and institutions, and use of the tax rebate. He bristles at cautionary tales of student loans topping $100,000, which he says is just not representative of most student debt. If there is a typical borrower, Brown says it would be a young undergraduate assuming about $30,000 in loans without understanding the terms and impact on daily life.

“I think people need to take on what they need to take on to get the degree,” he says. “They need to be as resourceful as possible in finding grants and finding money. They need to be as frugal as they can with their money. There's that level of personal responsibility.”

But Brown thinks high schools and colleges are also responsible for teaching students financial literacy (the Finance Authority of Maine hopes to address this with a fall pilot program on financial literacy at several of the state's colleges), that the state is responsible for funding public universities adequately, and that the University of Maine System is responsible for rerouting money spent on administration toward students. (See “Debt burden at Maine colleges and universities,” this page.)

And he thinks business leaders are responsible for facilitating employee education.

“I think some businesses complain a lot about the lack of an educated work force but there's also a wide variety in the level of engagement of Maine's businesses on this issue,” Brown says. “Some are incredibly on board, funding tuition reimbursement and providing internships and apprenticeships. They recognize the value of higher education and put their money where their mouth is. And some haven't done much yet.”

As for Kennebec Technologies' Beach, he is still going. He began an MBA program at Thomas College in Waterville and hopes to finish his degree in a year.

“Rather than take one course every semester I might as well just get it over with,” he says. “The sooner I'm done, the sooner I can move on with my work.”