Debt vs. Service: The Struggle in Nonprofits

In previous articles of Debt vs. Service, we looked at how student debt is burdening the nation’s educators and healthcare workers. In our final deep dive, I spoke with nonprofit staff to understand how student loans are affecting them. Having worked in the sector myself, their struggles were no surprise: nonprofit staff are overworked and underpaid - which is forcing many of them to move on in order to afford student loan payments.

Nonprofit staff are weighed down by student debt

Nonprofits strengthen communities by providing resources and services to the public. However, according to the Nonprofit Student Debt Project, student loan debt is “hurting recruitment, retention and diversity in the nonprofit workforce.” Nearly two-thirds of nonprofit staff have earned a bachelor's degree or higher, but typically earn less than their for-profit counterparts. With the average federal student loan debt at $37k, it’s increasingly difficult for nonprofit workers to gain financial freedom.

Many people I spoke to said the pressure to go to college made taking out loans inevitable. “No one really talked to me about loans or anything. I was just like, ‘Okay, cool. I'm just gonna go to school,’” said Kourtney, a grants associate and nonprofit consultant. “Everyone told you to go to college, so you just went to college and didn't really think about the loan part of that.”

Like many others, Kourtney took out loans without truly understanding what it meant. “You don't have a concept of how much money that is at that age. That was a small salary. That was more money than my mom made in a year, that I just took out on a Tuesday.”

Consequences of those loans were often not fully realized until after payments started post-graduation. “I thought I would be able to pay a lot more toward them. You know, you get the offer letter, you have your salary, and it seems like, ‘Oh, okay, this is perfect. I can do this.’ And then you start living and it doesn't really go as far as you thought it would,” said Justine, a development associate and grant writer. Both she and Kourtney told me paying off their loans is taking much longer than expected. “I kind of accepted I'm always gonna have some debt somewhere.”

Student loan debt is a constant burden

Relatively low pay for many nonprofit jobs makes the strain of student loan debt even harder to swallow. “I have to always think about the car payment, the gas bill, the water bill, the electric bill, the rent, the power, the student loans, and the insurance,” said one nonprofit worker. “They all are the same general cost of living.”

Like other public service work, nonprofit staff sometimes have to take on multiple jobs to get by. “At 20, I was like ‘Oh my god, I have all these loans. I don’t know what to do.’ I super anxiously got four jobs and I worked four jobs,” said Kourtney, who has worked multiple jobs for over a decade. She is currently a grant writer, nonprofit consultant, and student. “I definitely have to be innovative about what I could do to earn money and cut back to just afford the minimum.”

In 2023, Kourtney and her fiancé took in her cousin, a minor who needed family support. Adding another person to their household and navigating familial hardships was financially and emotionally straining. “It’s very taxing. And it's hard to do that stuff while also trying to pay back debt and work and maintain a kind of home-life while maintaining some kind of individuality.”

Debt influences everyday decision-making

The effects of student loans are far-reaching. For Justine, who graduated in 2022, loan payments have already started to affect her life on a larger scale. “It affects how I make decisions in general, especially when it comes to finances,” she told me.

Recently, she’s been burdened with vehicle issues. “I have to get my car fixed right now and I'm like, well, it’s not an urgent thing that I need to get fixed. So I can either pay this or make bigger payments on my loans and pay that off faster.” Another public service worker wrote, “I decided not to buy a new car when I had my first baby, since I had already paid off the car I had at the time. It was not worth getting an SUV and having a car payment when I already had such high student loan payments.”

Kourtney told me, “My fiancé and I have no children and no dog. We keep thinking about having kids because right now we have more time but we don't have money if God forbid something happened, we'd be grasping at… we’d be spending down our savings to just stay healthy.” Both she and her fiancé have chronic illnesses that have at times brought on unexpected financial stress. “I think that's what I worry about most, is suddenly being in a position where I'm the primary breadwinner and I'm still paying off these loans.”

Student loan repayment leads to long term sacrifices

71% of people with student debt delay major life goals such as buying a car, homeownership, and parenthood. Putting off these milestones was a common theme amongst people I spoke to, nearly all of them mentioning how dreams they thought they’d have achieved by now are nowhere within reach. “I’m 32 this year and my friends are 35, and nobody has any kids!” said Kourtney. “It's like, those are things that you're supposed to do while you're in your 20s. Everything's pushed back ten, fifteen years.” She said many of her friends are “house-broke” - able to afford where they live and nothing more.

Like Kourtney and her friends, a third of borrowers delay parenthood and some are choosing not to pursue it altogether due to student loans. A New York Times survey found that of people who have chosen not to have children, 13% were influenced by their indebtedness.

PSLF is a promising solution with disappointing results

Public Service Loan Forgiveness (PSLF) is a federal program meant to relieve dedicated public service workers of debt after ten years of regular payments, and many organizations within the nonprofit sector tout its potential for retaining the workforce. However, with a 2.3% acceptance rate, PSLF isn’t a realistic solution for most.

One nonprofit staff member told me, “I think on one hand, PSLF is a good incentive to keep people in the nonprofit sector because we need those people, right? And you want them to stay. But it feels like a double-edged sword with it being to get your loans forgiven. Ten years is such a long time.” With high turnover rates in nonprofits, staying long enough with an organization in order to have the remaining loan balance forgiven is currently unrealistic for many workers.

After only working in the nonprofit sector for over a year, they’re already considering whether they should leave, in part for financial reasons. “I don't want to quit, but I do think about it from time to time. If you have a lot of student loans, you know, that's a consideration you have to think about.”

For more information on how PSLF works, see our article, Navigating Public Service Loan Forgiveness.

Nonprofit staff are overworked and underpaid

Retention is a serious problem for the nonprofit sector. Having left my nonprofit job along with a majority of my peers in 2021, I am well-acquainted with how taxing work within these organizations can be.

According to the 2024 State of Nonprofits, 75% of nonprofits feel burnout is impacting their ability to achieve their missions. Burnout is the “visible symptom of an invisible problem,” said a Center for Effective Philanthropy article. The invisible problem? An unrealistic workload caused by understaffing.

Working in nonprofits was once described to me as having to “wear all the hats all the time.” Where a for-profit company may have many staff able to take on specific roles, most nonprofits have to get by with as few staff as possible. I once had a position where I was expected to be a program director, volunteer coordinator, payroll manager, communications specialist, and data analyst all while being paid less than a living wage.

Having so many roles and responsibilities may sound excessive, but it’s not uncommon. Every nonprofit staff member I have ever worked with had multiple roles with responsibilities well outside of their job descriptions. This is mainly due to how nonprofits are funded and what that funding is willing to cover.

The landscape of philanthropy is part of the problem

There are 1.8 million registered nonprofit organizations in the United States. 70% have ten or fewer paid staff members and are operating with annual revenues of less than $50k. Many smaller nonprofits rely heavily on grants, especially in the early years, and most grants are seeking to fund projects and programs, not general operating costs like salaries. This means funders are granting money for direct service work to happen but that money is not reaching the staff who actually do the work. As a result, nonprofits are forced to find money for employee salaries elsewhere, a difficult position when salaries make up 47% of operating costs.

With the current landscape of philanthropy, it’s difficult for nonprofits to pay their existing employees a fair wage and nearly impossible to bring on enough staff to lessen their workloads. The result is disheartened and disengaged workers, who eventually choose to seek employment elsewhere.

High staff turnover affect those in need

According to a survey on retention practices, decreased morale had the most significant impact on employees choosing to leave the nonprofit sector. The turnover rate is a staggering 30%, well above the national average, and it doesn’t seem to be getting better anytime soon: a majority of nonprofits expect turnover to increase or stay the same, with 3 of every 4 organizations reporting vacancies.

74% of those vacancies provide direct service to the public. This poses a real issue for our communities, as a shortage of nonprofit workers means longer wait times and reduced services. “You need more people to do the stuff that's already happening when you're increasing the kind of direct service that we need. And it's direly needed, especially post-COVID,” said Kourtney. Not having enough people in these positions means those seeking help cannot access resources and support when they need it.

Fair compensation should be a top priority

The top three reasons for above average turnover rates in the nonprofit sector are the inability to provide competitive pay, inability to provide competitive benefits, and burnout. 72% of nonprofits report salary competition affects their ability to recruit and retain workers.

One nonprofit worker I spoke to told me, “I'm lucky because the organization I work for, they do pay really well. But I find myself saying, ‘Really well for a nonprofit.’”

According to Payscale, the average salary for all nonprofit staff is $70k, but positions range widely with higher pay in leadership and executive roles. The annual pay for most public-facing, direct service positions is much less: $33k for community outreach coordinators, $45k for volunteer coordinators, and $50k for program coordinators.

Low pay on top of regular student loan payments means many nonprofit workers find it difficult to make ends meet and are forced to choose higher paying jobs over their community-based work. 41% of people choose to leave their nonprofit jobs due to unfair compensation and benefits.

“As much as I love working with nonprofits, I think they're notorious for not being able to pay as much as for-profit companies. So it just makes it tricky when you're trying to think of the outlook of where you might be in a few years. You're not going to be as far ahead as maybe some other people working in the for-profit industry,” Justine told me.

“This isn't something you do because you wanna be rich,” stated Kourtney, who started working for a domestic violence shelter earlier this year. We talked at length about the impact nonprofits have on their communities, as well as the difficulties their employees face. The main takeaway? Communities need dedicated individuals to do what is sometimes emotional and draining service work - and nonprofits need to compensate those individuals fairly.

Increasing benefits could keep nonprofits afloat

To help attract and retain employees, the Chronicle of Philanthropy advises increasing pay and offering “perks”. Though increasing employee pay can be difficult for nonprofits who rely mainly on donations and grants to operate, 82% of organizations say they plan to use compensation and benefits as a retention strategy.

An especially attractive perk nonprofits could offer is employer student loan repayment. When I brought it up to Justine, she said, “Student loan repayment would be a huge benefit and I think it encourages professional development as well because if people are getting help paying off their loans I think they might decide to go back to school for another degree and that ultimately helps the organization because they're developing that talent and that skill set.”

“Having organizations help pay off employee student loans would be an incentive in itself to stay,” said a nonprofit worker who is considering leaving the sector. 86% of employees agree, saying they would stay with an employer for at least five years if offered loan assistance.

The good news is that adding this benefit doesn’t have to break the bank. $25 a month toward an employee’s student debt costs an organization just $300 annually but can save their employee thousands of dollars and years worth of repayment. Want to see what offering employer student loan assistance could save your nonprofit? Try out our Return on Investment calculator.

With the need to attract and retain nonprofit workers growing even more important, adding an employee student loan repayment benefit is a simple way to help passionate people stay where they’re needed most. Services like Paidly make setting up and distributing this benefit easy.

Employee student loan assistance services

Easily offer student loan repayment benefits. Download our free guide or visit our employer benefit page to learn how to relieve employee financial stress.

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Throughout Debt vs. Service, we’ve covered why public service workers are struggling with student loan debt, how PSLF is failing them, and the ways in which student debt is impacting real educators, healthcare workers, and nonprofit staff. In our final article, I’ve compiled everything public service workers want students to know before taking out loans - including how to set up their future selves for financial freedom.

Thank you to everyone who generously shared their experiences with me. Quotes were lightly edited for clarity and names of interviewees were included in this article with permission.