(Bloomberg News) When Megan Horinek graduated from Fort Hays State University in Kansas in 2010 with a marketing degree and $20,000 in student-loan debt, she dreamed of returning to her hometown of Atwood, 140 miles away.
After a stint with Kraft Foods Inc. in Wichita, she was able to move home this year, taking a lower-paying job in nearby Cheyenne County. Horinek was motivated by a new state program that offers as much as $15,000 toward student-loan repayment for people who relocate to areas beset by population declines.
"To know that I will be able to have my loans paid off within five years is even better than just finding a job," said Horinek, 23, who works as a consultant for the Kansas Small Business Development Center. "If I do choose to get married, or start a family, then I won't have this hanging over my head."
State and local governments are joining some private and nonprofit companies in capitalizing on graduates' concerns in a sluggish economy about repaying their student debt to attract new residents, talent and consumer dollars. Outstanding loans total about $1 trillion, topping U.S. credit-card debt. In Kansas, the perk has attracted 411 applicants representing 33 states, according to Chris Harris, who manages the program for the state Commerce Department in Topeka.
"We were trying to address a loss of young population," Harris said. People drawn to the state through the program will reinvigorate local economies by bringing families with them and buying houses, he said.Need 'Intensified'
Among companies, Tenet Healthcare Corp., which owns or operates hospitals and health-care facilities across the U.S., promotes loan-repayment incentives in its job ads. Some of the Dallas-based company's facilities started offering the perk in 2003.
Students in health professions often graduate with high debt burdens, making companies with loan-repayment plans especially attractive. Physician-recruitment company Cejka Search Inc. has seen health-care providers, including St. Louis- based BJC Medical Group, begin to offer repayment plans in compensation packages for physicians in the past few years.
"The need to use it has become intensified," said Mary Barber, vice president for marketing at Cejka.
Kansas allocated $1 million for the first year of its program, which applies to 50 rural counties that have seen a 10 percent population drop since 2000.
The guidelines for the Kansas program were designed to be as broad as possible, Harris said. Graduates with associate's through post-graduate degrees can qualify for the program, which spreads payments out over five years. Applicants must have established residency in a qualified county after July 1, 2011.Workforce Loss
The city of Niagara Falls, New York, offers a loan repayment plan to attract young people, and Nebraska looked into creating one, partly out of concern that the Kansas program would lure college graduates across their shared border.
More than half of Nebraska's 93 counties have lost more than 5 percent of their populations in 10 years, according to the last census. The state considered offering $7,500 over five years to student debt holders who moved into those counties. Budget concerns kept the legislation from moving beyond the Senate Revenue Committee in its most recent session.
"Most definitely we will lose a qualified, skilled workforce to Kansas," Nicole Sedlacek, director of economic development for Holt County, Nebraska, said in a telephone interview. The region saw an almost 10 percent drop in its population between 2000 and 2010, while neighboring counties lost as much as 22 percent in the past two decades.Nebraska Bill
The exodus has left companies struggling to find labor.
"We have jobs, but we need people to fill those jobs," Chris Roth, president of Deshler, Nebraska-based Reinke Manufacturing Co., told the state revenue committee in January. Reinke, which manufactures irrigation equipment, employs 500 people from northern Kansas and central and southern Nebraska and was looking for 50 employees to work at a new facility.
A loan-repayment bill is likely to come before lawmakers again, Sedlacek said. She expects some companies themselves will offer similar perks while they wait for Nebraska to act.
College undergraduates from the class of 2010 on average left school with $25,250 in student loan debt, according to The Institute for College Access & Success in Oakland, California.
Loan repayment programs are a smart incentive because a similar program specifically for dentists, physician assistants and other medical professionals has attracted workers to Nebraska since it began in 1994, Sedlacek said.Health Care
Student-loan assistance is more common in health care than in other professions. Thirty states and Washington, D.C. have repayment or consolidation plans for dental or medical workers, according to a 2011 American Dental Association report. Several private health-related companies also offer the incentive.
For years, physicians and other medical workers could apply for loan forgiveness for serving communities in need through the National Health Service Corp. The private employer programs that Cejka deals have no ties to government jobs.
In an annual retention survey by Cejka Search and the American Medical Group Association, 35 percent of medical groups surveyed had offered loan repayment to candidates in the past year, and they included it in about 25 percent of packages.
David Knocke, president of BJC Medical Group, said the plan helps draw and keep people in high-demand primary-care positions in rural areas -- and the deal works out for everyone.
"Most of these guys are coming out of school with an incredible amount of debt," Knocke said. "If they get a position that pays that, they can spend their money on other things."Employee Retention
The time is ripe for more employers to use debt repayment to attract talent, said Paul Combe, president of American Student Assistance, a debt-counseling nonprofit company.
"It's so prevalent today -- it's part of the fabric," Combe said of the debt-load burden on graduates. "It's moved away from cocktail chatter."
Since 2006, Boston-based American Student Assistance has offered full-time employees as much as $2,400 a year for loan repayment, while part-timers can get a smaller benefit. The program had 71 participants in 2011. Combe attributed high employee retention partly to the program, citing the company's 12 percent turnover rate compared with the 16 percent average for the Boston area.
Tyler Aronne, who graduated from Salem State University in 2004 with $20,000 in debt and began working at ASA in 2007, gets about $2,000 a year from the program after taxes. Aronne, now 30, said that has helped him reduce his debt balance to $6,000 and lets him make more than the minimum monthly payment.
"It's not easy to be single and living alone in Boston," he said in a telephone interview. "It became a major reason that I stayed at the company."'Ripple Effect'
Horinek, the business consultant from Atwood, Kansas, is Rawlins County's sole participant in the program so far. It would make sense for Kansas to allocate more funding and offer more incentive packages in the future, she said.
"The economic impact - it's more than just one person," said Horinek, who has purchased a home. Her return inspired her sister to move her family back to Kansas from Nebraska. "More spots mean more of that ripple effect."