Frankie, a gifted accountant, crushed by gambling debts, borrows heavily from a Mafia loan shark, can’t make even the 50% monthly interest payments, and is about to get his knees cracked like a piñata with a hefty, Louisville Slugger pinewood bat.
But Frankie and the Family get creative: Frankie cuts a deal—He does the Mob’s books for an “entry-level” salary and pays back his debt pegged with a less extortionate interest rate (since he is now “family”).
Not bad, as a job-creation model: If you are a debtor, get hired by your main creditor; if you’re a creditor, hire one of your debtors. If the debt is big enough, this means long-term job commitment and debt repayment assurances from both the creditor and debtor perspectives.
The question is, can this creditor-employer model be generalized?
It’s not as though there is no historical precedent; after all, there is the iconic Wild West struggling settler in the quasi-indentured service of the desert mining town company that also owns the general store, the saloon, all the land, the medical services and virtually all the other necessities of work, if not life.
Want to work in the mine? You’ve got to buy your boots, pick, shovel, lamp, rope, other gear, food, blankets, seed, home furniture, saddle, horse shoes, etc., from the company stores and shops—most likely on credit (which becomes debt). Now, work to pay off that debt, get by in the present and save for the future (if you can or have one).
Then of course, there are the early American colonists, many of whom became long-term indentured servants to pay off the costs of their bold or desperate voyage across the Atlantic.
However, this (quasi-)indenture model is a bit different from the Mafia model suggested above: Frankie’s debt was not incurred in order to work for the Family.
His new job with the mob, unlike that of the miner, was only a consequence of his debt, not an objective. Still, the trapped miner’s contract is also an instance of creditor and debtor working out a working relationship as a means to paying off a debt between them.
What about the modern student loan-freighted university or college graduate, stuck with an average of $26,600 as a student loan that, in the present and foreseeably bleak job market, is going to be tough, if not impossible, to repay before the tenth manned mission to and colonization of Mars?
Applying the premise and logic of the creditor-debtor employment model, it would make sense for the creditors of these debtor students to hire them—even if only to ensure these graduates an income stream from which they can siphon off at least the interest payments on the loans held by the same banks.
Creditor-Employers of Choice
So, who are the creditors one could work for?
Of course, there is the trio of government, banks and family. In general, going to work for the bank that holds your debt exemplifies the Mafia model: The debt incurred with the bank is usually not taken on in order to get a job with the bank (except for those Armani-minded economics and business majors who set their sights on banking even before graduation, for reasons unrelated to their bank debt).
Like Frankie, the typical bank-loan burdened arts graduate may see the bank as the only option or much better than the alternatives. Like the loan shark, the bank sees the potential for full recovery of the loan, or, at worst or best, perpetual and dependable payment of the interest due on the outstanding debt.
Unlike the Mob, some banks will actually see this as the arrangement of choice, surpassing the finite and ultimately zero revenues after full loan repayment.
Similar logic applies with government-funded and underwritten student loans (or quid pro quo student ROTC programs)—with one difference: Given the perks of civil service, it is quite likely that with government-based creditor employment, including fatter-than-private-sector salaries in many instances, loan pay-down may proceed faster.
However, this rosy prospect will not, in this instance, diminish the likelihood of unending commitment from the debtor, because, after all, who ever quits a government job?
Whether the government creditor model takes the Mob form or not depends on whether working for the government was both the objective and the consequence of the funding (e.g., as it is with ROTC graduates, obligated to provide some years of military service and whose undergraduate government support is not an explicit loan).
If a government job was the goal from the start, the Mob model does not apply. In the unlikely case that a government job is reluctantly sought and accepted, under duress of threatened governmental debt-collection steps, the debtor indeed ends up working for the Gov’t Father.
Working for Your Real Family
Then there’s family debt, i.e., student loans owed to parents, uncles, etc. The creditor-employer model, i.e., being hired by one’s real family makes sense here, as an alternative to working for the Family.
When a degree is useful to the family business, many parents, uncles, siblings, etc., will naturally favor hiring their indebted degreed kin over anyone else, even someone with a better degree from a better school—a case of genetic credentials trumping acquired ones.
That’s one way nepotism works: Sometimes, from the family’s perspective, a Ki.D. is valued more than an outsider’s Ph.D.
There is, however, a case in which this family creditor-employer model doesn’t apply: When the business is a family operation that doesn’t require a degreed employee (and therefore a child’s student-loan debt), the student loan may not be necessary in the first and final place.
However, family borrowing for a degree of no use to the family business may be required when the grad’s “self-actualization”, snob appeal, family bragging rights or simply the demands of the job market drive a need for one’s kid, niece or nephew to have a degree—any degree.
Moreover, a simply unforeseen lack of job options after family-funded graduation, may cast the family in the role of “employer of last resort”, as well as “creditor of first resort”.
In those cases in which working for one’s parents or other relatives was nobody’s dream, the creditor-employer family job-model works in exactly the same way as the creditor-employer Mafia job-model (except that pre-existing emotional ties and maybe filial guilt make the bat unnecessary as leverage).
Implicit in this creditor-employer model is a valuable piece of advice to anyone who anticipates getting into crushing student debt and being unable to repay it (or even the interest): If you can see the burden ahead of you, be sure to borrow the money from a source you won’t mind working for and who won’t work you over with that bat to collect that debt.
Creditor-Employer Offered Employee Benefits
Unlike the scramble to find a job—any job—that will allow you to pay down your loan after you’ve incurred it, the search for the right creditor, at the outset, before you’ve taken on that debt, will give you an edge over other debtors, including student loan debtors.
You can be sure that the prospective creditor-employer will be far likelier than most other conventional potential employers to
- have a vested interest in helping you make your loan payments or otherwise repay whatever you owe.
- not terminate you when jobs are scarce.
- provide you with the advance and advanced training required to excel at the job you take to repay your debt (e.g., ROTC).
- be motivated to offer such loans or other investments in you before hiring, especially when other jobs are scarce (e.g., military recruiters prowling malls).
Universities: One More Logical Creditor-Employer Pick
One additional, particularly attractive creditor-employer model features the universities themselves as the creditor-employer.
What is attractive about this school-based model is that, like the university/college-based ROTC programs they authorize, the lender (in this case the school) is not only expressing a vote of confidence in the debtor’s prospective job skills and taking steps to assure repayment, but is also expressing faith and confidence in its own debtor-recruitment and service-delivery capabilities and systems.
After all, a university bursar would have to be daft to lend money to students who are unlikely to land a job commensurate with their debt, their aspirations or their skills (if they graduate with any)—wouldn’t (s)he?
Within this creditor-employer framework, the university will educate you, graduate you, and then employ you (so you can repay its loan to you). This means working for the university in any capacity, e.g., administration, IT, fund raising—even maintenance and campus security, if your major didn’t quite work out for you as hoped or expected.
Of course, the best, most logical debtor university job would be that of professor; but not just any professor. To maximize the odds of having all four of the benefits listed above—especially #2, the non-termination prospect, the professorship should be tenured, which precludes termination for anything except the likes of “moral turpitude” or death (even when the latter is suspected, despite perfect lecture attendance by the professor).
To make that position even more secure, it would pay to carefully choose courses to teach that inherently perpetuate the system.
Say, “Successful Creditor-Employer Models 101”.