Martin “Marty” H. Singer is Chairman and CEO of PCTEL, which develops antenna, scanning and other solutions for wireless networks. Before PCTEL, Singer served as President and CEO of SAFCO Technologies, another wireless communications company. He was also a Vice President and General Manager at Motorola and held senior management and technical positions at Tellabs, AT&T and Bell Labs. With a Vanderbilt Ph.D in experimental psychology, Singer is a trained thinker. He shares this space with other distinguished executive thinkers, who offer occasional musings from “the corner office.”
By Marty Singer
About 18 years ago, a young Venezuelan-born engineer – let’s call him Fred – approached me. He had been working for our Chicago-based company for about a year and he had bad news. His college bachelor’s degree from Penn State had been funded by the Venezuelan government; and, unless he returned to Venezuela he needed to repay $40,000. He wanted to stay in the U.S., but he had no choice but to give me notice that he would be resigning his position.
After a brief discussion with our parent company and my CFO, we offered to pay off the loan in return for a commitment that Fred would work for us for four years and reimburse us if he left early. Indeed, I left the company before Fred. After his four years, though, he joined the team at my current company, PCTEL, where he is one of our most highly-valued associates.
Our policy now is to approach the top, young performers at the company and inquire about their college loans and continuing debt. We’ve paid off loans ranging from $10,000 to $40,000 under arrangements very similar to Fred’s. In each case, those associates have held up their end of the bargain. From my perspective, these college loan payoffs have been among the best investments that we have ever made.
College loan debt crushes young people. More than 70 percent of graduates face debt of at least $30,000, according to Edvisors, which analyzes college debt. And if they pursue post-graduate education – an MBA, J.D. or Ph.D. – the debt soars even higher. About 15 percent of graduate and professional school students leave college with more than $100,000 in debt.
Of course, these graduates are grateful that the loans funded their education. On the other hand, the debt burden stands in the way of renting or buying housing, getting married and saving for the future. It is emotionally stressful, and debt-burdened workers are always searching for a quick fix – a new job with a signing bonus or other frictional benefits – that will address their debt. Retiring these debts evaporates a weight suffocating these young lives. It frees them to engage in different thoughts about the future, and to be more productive employees.
Is this altruistic on our part? Not really. We have retired five of these loans and paid the associated taxes. Just as Drucker asserted that “Quality is Free” when compared to the alternative, there is no cost to erasing college debt for strong contributors. If the debt burden motivated Fred to go the highest bidder, we would have incurred costs, lost profits and risked intellectual property that dwarf the cost of retiring his student loan. We’ve created long-term – if not lifetime – associates and avoided major search firm costs, transition expenses, and the unavoidable loss of proprietary information every time someone leaves. These are valuable members of our team, who might have worked for a competitor, taken market share away from us, and deprived us of their energy and contribution. Paying off college debt isn’t free; it’s a profit center!
We are small potatoes in the world of public companies. We have 450 employees and generate close to $110 million in annual revenue. What if larger public and private companies took up the challenge of eradicating student debt? When I graduated with about $2,000 in college debt in 1973, the government reduced my debt for each year of teaching or public service. They gave me “credit” for teaching while pursuing my Ph.D. and completing a post-doctoral fellowship. It was financially meaningful to my wife and me.
The government doesn’t have to go this alone. And families, with incomes shrinking as they are, shouldn’t have to bear the brunt of the burden. Large corporations could evaluate promising new associates after a year and offer them, under conditions that they set, an opportunity to relieve their debt pressure. Companies that implement these programs will distinguish themselves from others, and their associates will reward them with loyalty and commitment.