Could Your Student Loans Make You Unemployable?

[rsmith6621]

http://www.policyshop.net/home/2012/5/1/could-your-student-loans-make-you-unemployable.html


One major reason people pursue a college degree is to get a better job. But what if the debt accrued to finance an education itself becomes an obstacle to employment? That’s what happened to Latoya Horton.

“Years ago I went to college to study accounting, and like millions of other Americans I took out loans to pay for it,” writes Horton. “A few years later I got a temporary job in the accounting department at Bain & Co., and after 6 months of reliable work I was thrilled to be offered a full-time position.”

But then things took a turn for the worse:

just a few weeks after starting in my new position the company fired me because my debt-to-credit ratio was too high. I later learned that 60% of employers now check credit reports, which typically include student debts. How are you supposed to pay off your student debts if you can’t get (or keep) a job BECAUSE of your debts? And what do my student debts have to do with my ability to do a job well anyway?


WE NEED TO BE ON OUR CONGRESSMAN ABOUT THIS ..... THIS INSANE

[kestrel91316]

1. Does Bain & Co have anything to do with Bain Capital? Just curious.....

[tabbycat31]

11. I believe they do

[taught_me_patience]

47. Completely different companies

Bain & Co. is an established consulting firm. Bain Capital is Romney's old leveraged buyout company.

[Liberal_in_LA]

2. this happened to a law grad last year - graduates with big all law school loans too

high to get him hired at a job. It was in the news.

[aikoaiko]

3. Its odd that they offered her full-time employment without the credit check.

[TBMASE]

6. Companies will have in their offer letters

that your employment offer is contingent on passing their background check but they'll want you to start work before they complete it. Which sounds like what happened here

[TBMASE]

4. I've never understood why an employer

needed your credit report

[aikoaiko]

5. The employer I work for does it for anyone who handles money.

There is no rule about XXX score or Y debt/credit ratio, but we don't want people in obvious financial trouble handling or managing money.

[TBMASE]

7. Equating poor credit or high debt with dishonesty or lack of integrity

is a silly thing to do.

[Orrex]

13. 100% correct!

I have raised that very point in the past here and on DU 2, and I have generally been presented with a laundry list of bogus reasons why employers are justified in prying into your financial affairs.

Simply put, there is NO valid reason for an employer to check an applicant's credit history, any more than they should be able to base employment upon political affiliation or the number of sexual partners one has had. That's true even in the finance industry; I'm sure that the Wall Street insiders who destroyed the country all had sparklingly high credit scores, for instance.

Even if one's credit score was ever an accurate guage of employability, which I doubt, it certainly is no good predictor in the lingering aftermath of Bush economic catastrophe.

[PSPS]

14. Credit ratings are now also used as an underwriting tool for car insurance.

[Orrex]

15. Well, obviously that makes a great deal of sense!

After all, if I was right-sized from my job and subsequently lost my house, it stands to reason that I must be a bad driver!

[SharonAnn]

21. No, but you might be tempted to commit indurance fraud by faking

the theft of the car or staging an accident.

[Orrex]

26. No, I don't buy it

A person who would engage in insurance fraud might also have a poor credit rating, but it doesn't follow that a person with a poor credit rating would engage in insurance fraud.


It's correlation vs. causation, and there is no evidence that a poor credit score reveals anything about the individual's honesty or integrity. None at all.

[muriel_volestrangler]

29. And someone rich may have got rich by staging accidents

there's about as much causal link in either case.

[RedRocco]

30. then why does it make liability insurance higher as well?

[closeupready]

33. Completely disagree.

nt

[pnwmom]

16. +1.

[SharonAnn]

19. For some kinds of jobs, it's appropriate to use various tools such as credit check

to evaluate applicants. Howevefr, it shouldn't be the only tool. There could be many legitimate reasons for a person have a high debt ratio for several years.

Unmanageable debt has triggered some people to embezzle money, defraud investors, etc. So it really depends on the type of debt. A person entering a new job market could legitimately have high debt at the start.

It really should be just one of the tools. And if it's a concern, it should be discussed with the applicant to help determine if it's an actual issue.

Many doctors graduate from medical school and residency with very high student debt. Do employers not hire them because of that? I think not.

But, someone who will be handling money and might have access to methods to steal or embezzle it, could warrant a discussion with them about the situation.

[Orrex]

25. I respectfully disagree

A credit check says nothing at all about the reliability of an employee. Nothing at all. That's true even if you're handling large amounts of cash. If we assume that a person with bad credit is more likely to steal to improve his financial situation, then we can as readily assume that a person with great credit is more likey to steal in order to preserve his great credit. One simply has no causative relation to the other.

By the same token, no food service job should hire anyone who is now (or might at some future time be) hungry, because they'd be more apt to steal food than someone who has a full stomach.


A credit check is simply inadequate as a tool to assess employee reliability.

[dmallind]

27. So you don't think that someone at risk of foreclosure or bankruptcy

Is going to be more tempted by access to cash than someone who is financially secure? Are money problems not motivations? People are certainly willing to mug or rob for sums that won't buy a week's groceries, but you don't think they are willing to embezzle to save their house or creditworthiness?

[ck4829]

34. Ken Lay didn't seem to be in any money problems

[Orrex]

37. So you agree that creditworthiness is no predictor of honesty or integrity?

People are certainly willing to mug or rob for sums that won't buy a week's groceries, but you don't think they are willing to embezzle to save their house or creditworthiness?

Your question frames the issue quite well. People are indeed willing to embezzle to save their houses and their creditworthiness. And a poor credit score--a dubious calculation at best in any case--is no predictor of an individual's honesty.

I'm glad that we're on the same page on this. Too often I've seen people supporting the nonsensical claim that financial hardship equates to dishonesty.

[PA Democrat]

38. Research shows there is NO LINK between a bad credit score and employee theft

A team of researchers pooled from Louisiana State University, Texas Tech University, and Northern Illinois University reports that its recent study shows absolutely no link between a bad credit score and employee theft. Interestingly — and not contradictorily — the researchers did find a relation between credit scores and personality types.

Explains LSU researcher Jeremy Bernerth: “With regards to personality and credit — it makes sense that conscientiousness is related to good credit, but what was really interesting was that agreeableness was negatively related to your credit score. That suggests easy-going individuals actually have worse credit scores than disagreeable and rude individuals. This suggests that agreeable individuals might get themselves in trouble by co-signing loans for friends or family or taking out additional credit cards at the suggestion of store clerks.”

So it might be going a bit far to say that people with perfect credit scores are stick-in-the-mud jerks who can’t be bothered to help anyone but themselves — such generalizations are never helpful in proving or disproving theories, though they’re certainly good at making people angry with one another. But is it any less ridiculous than the assumption that a bad credit score makes someone a sneaky, thieving, horrible person with no redeeming qualities? During a time when record unemployment makes having a stellar credit score difficult for more and more people, maybe the people doing the hiring can put the credit score judgments on hold and hire people on, say, their actual merits and ability to perform the task at hand?

“It was telling that poor credit scores were not correlated to theft and other deviant types of work behaviors,” says Bernerth. “Most companies attempt to justify the use of credit scores because they think such employees will end up stealing, but our research suggests that might not be the case.”

http://www.lockergnome.com/news/2011/11/02/credit-score-poor-indication-of-trustworthiness-in-job-screening/

And another study:

Jerry K. Palmer, a psychology professor at Eastern Kentucky University, said his studies, though relatively small, found no correlation between the quality of an employee’s credit report and that worker’s job performance or likelihood to quit.

He said he was not aware of any studies that showed a correlation between poor credit and employee fraud or violence. But he noted that more research was needed to show what credit reports could predict.

http://www.nytimes.com/2010/04/10/business/10credit.html?_r=1&pagewanted=all

[ck4829]

39. It's a modern day pseudoscience

Every era has it's examining the guts of chickens to tell the future and it's phrenology to say that they can predict how people will behave, this is what we have today.

[Orrex]

52. When you put it that way, I feel like a fool for submitting to those skull calipers.

20/20 hindsight!

[ck4829]

53. LOL! It's not 20/20 hindsight, you had a brain module for that!

The areas around the eyes are for language.

[aikoaiko]

22. I have not read anyone equating poor credit or high debt with dishonesty or lack of integrity

But with all other things being equivalent I can't blame employers for using credit checks for some positions.

[Odin2005]

8. This insanity has got to stop!

[Liberal Veteran]

9. Credit checks for a job (except in very rare circumstances) is such a scam.

Even background checks get to be annoying at times.

Not to be insulting to human resources folks, but in my experience, HR is top heavy with incompetent bureaucrats who will buy into any lame sales pitch from a company that promises they can help weed out bad candidates with processes that have as much veracity as a Magic 8 Ball without any of the ease.

[SharonAnn]

20. I was offered ajob in 1965 but the confirmation would be after the credit check, felony check, etc.

And this was for a job a hardware vendor in the computer services business doing
"Systems Engineer" work installing computer systems for customers.

As a young person in the 1960's, the only loan I had was my car loan and it was almost paid off. So there wasn't much credit to check.

I worked for that company for over 30 years and retired from them.

My assumption was that since I would be working with banks, accounting departments, etc. they felt they had to check these things. Again, since I had to debt to speak of, it wasn't a problem and didn't give it a thought.

[Justice wanted]

10. A Person's credit rating HAS nothing to do with a person's ability to do a job ALL this boils down

to is discrimination.

[Harmony Blue]

24. It is the ugliest and blatant discrimination of recently graduated college students out there

Basically, if you are not rich you should not bother with a college education.

[Justice wanted]

50. Not just graduates BUT anyone in general. My friend recently got a divorce and that cause a lot

of havoc on his credit BECAUSE he had to open up utilities in his name at a new place and EVEN untity companies and cable companies are running credit checks. He had to close out to credit cards because it was in both his and his ex wife's name and get new ones issued in his name alone and BELIEVE ME credit card like CAPITAL ONE (I use to work for these people) EVERY TIME YOU APPLY FOR A CREDIT CARD EVEN IF YOU ALREADY HAVE A CARD WITH THAT COMPANY THEY CHECK YOUR CREDIT!!

ANY TIME SOMEONE"S CREDIT IS CHECKED (THEY do NOT have to do ANYTHING like miss a payment nor not pay) YOUR SCORE GOES DOWN. SO EMPLOYERS CHECKING A PERSON'S CREDIT RATING CAUSES THE RATING TO GO DOWN.


So a friend who had an 850 the start of his divorce ended up with a rating of 200.

[Skittles]

12. WTF

Horton points out that Penny Pritzker, TransUnion’s Chair and partial owner, sits on President Obama’s Jobs and Competitiveness Council, which advises the President on putting Americans back to work. It’s ironic, Horton notes, that someone is “advis[ing] on national job creation when her company sells products that may keep qualified people out of work.”


Obama needs to go back to the drawing board on the people advising him about JOBS

[MJJP21]

17. debt to credit ration

Your credit rating which is affected by how much debt you owe also affects your car insurance rates. It is also true that the amount of debt you owe will keep you from being hired in many financial institutions including retail . You are considered too risky and may conspire to steal. This has been a fact of life for many years and is not new. What is new is how many students have unbearable amounts of student loans.

[provis99]

18. companies usually do this to get 2 weeks of free work out of a worker.

what happens is the company tells a new worker that their work is contingent on a background check; they don't tell you that it's a credit check. The worker works for two weeks, then the company says sorry, you are fired because you failed a credit-to-debt ratio. they then tell you that your check will be available two weeks from now, for the two weeks you worked. A lot of people won't go back and pick up their check two weeks later, and the ones that do are not allowed onto the work site (because they don't work there). So the company gets two weeks of free work out of the worker.

It seems to be pretty common; I've had this happen to me twice; once when I worked at Wal-Mart for two weeks, and once when I worked for Avis Rent-a-Car for two weeks.

[laundry_queen]

31. Companies that do that are stupid

It costs a company far more to hire and train and fire than they would save by postponing a paycheck for 2 weeks. And I don't know anyone who wouldn't go pick up their check for those 2 weeks. I just can't see this as being a policy, since accounting-wise, even if the paychecks aren't picked up, it doesn't really help a company's bottom line at all. It won't change their wage expense or net income. At the most, it might give them a bit of extra cash on-hand, but for Wal-mart and Avis, cash on hand is not really a problem, and net income is used more often as a measure of a sucessful business than cash is.

[coalition_unwilling]

48. I hope you went back and picked up your checks. I once had a temp agency

try to stiff me by claiming a check had gotten lost in the mail on the last two weeks of a summer job before I went back to school. I called the WI state department of labor and the check was mysteriously "found" the day after I called the DoL.

[Harmony Blue]

23. Credit ratings are out of control

It should have no bearing on your car insurance or the job you do. The people that gobble this up and think this is normal are sheep.

This is the highest form of discrimination and implicit class warfare.

[laundry_queen]

32. Agree with everything you say.

And it is the ultimate irony, isn't it? Go to school to get out of poverty, and be unable to get a job to get out of poverty because of the loans used to go to school.

[PA Democrat]

40. Agreed. I posted a link above that show no correlation between bad credit scores

and employee theft. This is yet another case of people willingly giving up more of their rights.

Credit rating companies are a big business and don't care who gets harmed in their quest to make a buck.

[ck4829]

28. Student debts need to be removed from credit scores or the credit job filter gets eliminated

You generally go to college to get better job, this is insanity... No, it's not insanity, it's stupidity that we have this.

K&R

[Bake]

35. Unless you're handling company money, why on earth does an employer NEED your credit report?

Answer: They don't.

It's just another way to rule somebody out for a job.

This country SUCKS big time.

Bake

[ck4829]

36. It can be fixed

Regulations on these credit reports in employment need to be implemented now.

[marmar]

41. A society that allows its citizens to be treated like this.....

...... is one that's about to collapse.

[ck4829]

42. We've been to the Moon and we've killed smallpox. We should be over this pseduoscience BS

We've gone from feeling the bumps on a person's head to "Oh my God, he's got a low credit score, he's going to rob my company blind and he's probably going to stab me in the parking lot after the interview is over! Aaahhh!"

[Icicle]

43. Credit checks are a kickback

Money and cronyism are the motivators here.
Remember when Rick Scott, former healthcare executive, now Governor of Florida, wanted drug tests for people receiving public assistance? Because his buddies in the drug testing business stood to make a crapton of money administering all those mandatory tests.
The credit-check-job-application is the same deal. It's a kickback to the credit agency.
I agree that it may be legit for occupations handling money. Maybe. But wouldn't a criminal background check be better?
Oh, but wait, criminal background checks come from Government and "government is bad!"

[ck4829]

45. They want the return of the Retail Credit Company

A 'credit report' used to be something very different. It had the same function, it could be used for loans and jobs. But it contained rumors along with verified information on everything from your sex life, your marriage, political activity, if you lived in a neighborhood that had scary black people in it, etc., and investigators were given bonuses for negative information. Files on millions of Americans were stored in the RCC's cabinets. And no, this wasn't a big bad government agency, but something that was a private company. And whatever happened to the RCC? Well, it's called Equifax today.

[taught_me_patience]

44. I don't believe this story

or there is a lot more to it that we are missing.

[ck4829]

46. Nobody wants to believe in vicious cycles that can trap you in the land of the American Dream

But they are all too real.

[coalition_unwilling]

49. Agreed. Tom Wolfe is a very politically conservative novelist and writer. But his

novel "A Man in Full" depicts how the smallest turn of events (a car being impounded, IIRC) can trap on in that land of the American Dream. Highly rec the novel for those who haven't read it yet.

[woo me with science]

51. DU Rec. nt