Federal work-study needs to grow up

Even before COVID, American higher education was facing a crisis of employability. According to the National Bureau of Economic Research, well over 40 percent of new college graduates were underemployed in their first job. We also know that two thirds of those who are underemployed in their first job remain underemployed five years later and half remain underemployed a decade later. 

This isn’t entirely the fault of colleges and universities, which by and large continue to equip graduates with the cognitive, critical thinking, problem solving and communication skills they’ll need over the long run. But the nature of workplace and hiring practices has shifted. And employers are increasingly requiring more specific digital and business skills and experience in entry-level job descriptions. Consider entry-level sales positions that increasingly list years of experience with the Salesforce platform in their job descriptions. Or supposedly entry-level cybersecurity positions where skill and certification requirements effectively demand two to four years of work experience. And even colleges and universities with the best intentions may fall short in this regard: some of these skills are more easily and naturally learned in an actual work environment than a classroom.

The arrival of COVID and the resulting shift to remote work and remote hiring has added even more friction to entry-level hiring. Employers are even more loath to take risks on unproven talent when they can’t physically onboard and oversee new hires. The Class of 2020 reportedly faced the worst job market in decades, and the Class of 2021 isn’t likely to fare better.

The best solution to the crisis of employability is to enable more relevant work experience while students are in school, or immediately thereafter. Wealthy students have had access to this for decades. They’re called unpaid internships and — unfortunately — they discriminate against the tens of millions lower-income and first-generation students who can’t afford to work for free. 

Renewing the “American Dream” necessitates an alternative that works for all students, particularly those who lack the connections and family support to land a good first job regardless of whether their résumé makes it through an applicant tracking system keyword screen.

One idea is to wait for a new federal program to incentivize employers to hire earlier. The Progressive Policy Institute recently suggested formalizing and incentivizing “intermediaries (public and private) by subsidizing them to create ‘outsourced’ apprenticeships. The intermediaries would be compensated for each placement of a candidate who meets certain criteria (such as eligibility for Pell grants) when the candidate is provided with an apprenticeship that pays minimum wage or better, trains with a marketable, relevant skill and leads to a permanent position in that industry.” Failing that, we could hope and pray that employers will change their hiring standards and behavior.

But a better idea is to use a resource we already have. Established in 1964 as a way to give financial aid to students who could work their way through college, the federal work-study program distributes about $1.1 billion dollars each year. And it continues in its historical form of employing low-income students in simple on-campus jobs. Federal work study students typically work in the dining hall, in the library, in the gym, etc,. 

There is no question that these jobs benefit students by keeping them connected to campus. Using a national sample, a 2016 paper found that participation in federal work-study improves completion rates by 3 percent. For students who would have worked regardless of federal work-study, the impacts on outcomes were the strongest. 

But as currently constructed, federal work-study does little to provide students with relevant work experience, or explore and develop their career goals. Participating colleges and universities are incentivized to employ federal work-study students on campus in jobs that typically don’t develop career related skills. The program provides a 75 percent wage subsidy for any on-campus job but only 50 percent for off-campus jobs. In addition, if federal work-study students wish to work off campus, they must jump through the hoop of demonstrating that such work is relevant to their course of study. Not surprisingly, 92 percent of federal work-study funds are used for on-campus jobs.

Two years ago, the Department of Education launched a federal work-study experiment that would allow participating colleges and universities to apply the program’s funding to private sector employment. The experiment removed a number of limits on private sector employment and applied the 75 percent wage subsidy to employment at qualified small businesses. Unfortunately, the experiment ran into COVID and results to date are nebulous. But as currently constructed, we’re skeptical of success: by solely focusing on private sector employment, this experiment allowing the private sector to capture Title IV funding is likely to run into significant opposition in light of concerns over past abuse by for-profit universities.   

The Department of Education should immediately recast the federal work-study experiment as a service-learning opportunity focused on experiential learning and career development. Qualifying students should be able to utilize federal work-study funding for any off-campus job as easily as for on-campus jobs. Participating institutions should be required to relocate the administration of federal work-study to departments more focused on building experiential learning. Career services, service learning organizations, and even student affairs might consider how the program could be part of students’ holistic college experience.

If a recast federal work-study experiment is successful and expanded across the entire program, it could go a long way to closing the employment gap for low-income and first-generation students. A grown-up program could help many more students take advantage of high-impact learning practices like service learning, undergraduate research and internships.

So here’s hoping the Biden administration won’t throw the federal work-study experiment baby out with the bathwater. There’s a kernel of an important idea here. Focusing the program on off-campus employment and requiring participating institutions to make curricular connections with service learning is an opportunity to make a gigantic leap in relevance by not only distributing financial aid, but also directly addressing higher education’s crisis of employability.

Michelle Van Noy is the associate director of the Education and Employment Research Center at the School of Management and Labor Relations at Rutgers, the State University of New Jersey. Her research includes higher education labor market alignment and effective practices in workforce education. Ryan Craig is the author of “College Disrupted” (2015) and “A New U: Faster + Cheaper Alternatives to College” (2018). He is a managing director at Achieve Partners.