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Newsweek
19-05-2025
- Business
- Newsweek
Student Loan Borrowers in These Jobs Have Most Long-Term Financial Impact
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. A new national survey reveals that public-sector employees are significantly more likely to hold student loan debt than their private-sector counterparts. However, they often face fewer long-term financial repercussions, thanks in part to structured forgiveness programs and targeted employer resources. Meanwhile, private sector workers continue to bear residual financial burdens despite repaying their loans. Researchers have labeled this phenomenon the "debt-overhang" effect. The report, released by the MissionSquare Research Institute on Monday, surveyed over 2,000 U.S. workers across both sectors and found that 43 percent of public employees carry student loan debt, compared to 36 percent in the private sector. Yet the effects of that debt diverge sharply across employment types, with private sector workers reporting more enduring financial stress, even post-repayment. Why It Matters The study highlights a troubling contradiction in the financial health of America's workforce: private sector workers who pay off their student loans may not achieve the same long-term financial security as public workers still in debt. This is due primarily to access disparities in employer-provided support and federal loan forgiveness programs. "Balancing competing financial priorities while managing student debt can significantly hinder wealth accumulation," said Dr. Zhikun Liu, vice president and head of the MissionSquare Research Institute, in a statement. Liu noted that even those who have paid off their loans may delay retirement savings or large purchases, extending financial insecurity into later life. Graduates of Columbia University's lauded School of International and Public Affairs (SIPA) celebrate at SIPA's commencement exercises at St. John the Divine cathedral May 17, 2004 in New York City. Graduates of Columbia University's lauded School of International and Public Affairs (SIPA) celebrate at SIPA's commencement exercises at St. John the Divine cathedral May 17, 2004 in New York To Know Among the key findings, nearly half of all employees (48 percent) reported receiving no employer-provided debt management resources, regardless of sector. However, only 29 percent of public employees were informed by their employer about the Public Service Loan Forgiveness (PSLF) program, which can forgive federal loans after a decade of qualifying payments for government or nonprofit workers. Despite the higher incidence of debt, public sector workers tend to fare better over time due to these support mechanisms. As a result, private sector workers often express more concern about their long-term financial outlook, even when their student loans have been paid in full. "The rising cost of education has outpaced inflation for decades, creating a financial barrier that hits private sector workers particularly hard," Kevin Thompson, the CEO of 9i Capital Group and the host of the 9inning podcast, told Newsweek. "As long as education remains this costly, the wealth gap will likely continue to grow, reinforcing economic disparities." What People Are Saying Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek: "For many public sector workers, the potential of student loan forgiveness was a major deciding factor in choosing that position. As the cost of higher education continues to outpace inflation, a lower salary plus forgiveness over 10 years may be more viable than a higher salary with 30 years of payments in a private sector career." Kevin Thompson, the CEO of 9i Capital Group and the host of the 9inning podcast, told Newsweek: "Public sector workers often carry more student debt, but they have unique advantages. Programs like Public Service Loan Forgiveness (PSLF) can wipe out balances after a set number of qualifying payments. On top of that, many government jobs come with pensions under the Federal Employee Retirement System (FERS) and generous retirement plans like the Thrift Savings Plan, often with matching. These benefits are often ignored by many but their power in regard to retirement savings is truly unmatched." What Happens Next Researchers recommend a dual-track approach: better communication and expanded access to relief programs in the public sector, as well as new debt-support initiatives in the private sector. "For many private sector employees, student debt is a long-term financial drag. Without the automatic savings mechanisms like pensions and matching contributions that public sector workers enjoy, private employees often have to delay saving while chipping away at their loans," Thompson said. Without broader intervention, disparities in financial security between sectors could widen. "Any student loan repayment is competing for dollars that might otherwise go towards retirement savings or purchasing a home," Powers said. "It's a time value of money and compound interest problem."
Business Wire
19-05-2025
- Business
- Business Wire
New MissionSquare Research Institute study shows public sector workers feel the strain of student loan debt more than private employees
WASHINGTON--(BUSINESS WIRE)--A new study from MissionSquare Research Institute (the Institute) highlights the significant differences in how student loan debt impacts the financial well-being of public and private sector workers. Based on a national survey of more than 2,000 public and private sector employees, the research report ' How Employer-Provided Resources Can Elevate the Impact of Student Debt Across Sectors ' reveals sharp disparities in financial security, retirement readiness, and career decisions between the two groups, underscoring the need for employer-driven support initiatives. 'Student loan debt continues to be a significant challenge for both public and private sector employees, but the differences in how it impacts their overall financial well-being are notable,' said Dr. Zhikun Liu, vice president and head of the Institute for MissionSquare. 'Our study shows that employer-provided resources and policy improvements can help to address these long-term financial impacts of student loans, helping employees build a secure financial future.' The study, co-authored by Zhikun Liu, Ph.D., CFP®, Eric T. Ludwig, Ph.D., CFP®, Chet R. Bennetts, Ph.D., CFP®, CLU®, ChFC®, CLF®, RICP®, and Ashlyn Rollins-Koons, Ph.D., CFP®, examines the opportunities to assist student loan borrowers' challenges, including further insight into the unique resources available to public sector employees. Specifically, the study found that public sector employees (43%) are more likely to have student loan debt than their private sector employee counterparts (36%). The study's results uncovered that student loan debt negatively affects financial well-being across both public and private sectors, particularly for those who still carry balances. However, private sector employees continue to experience financial strain even after paying off their loans, reflecting a unique phenomenon called a 'debt-overhang' effect. 'Balancing competing financial priorities while managing student debt can significantly hinder wealth accumulation,' added Dr. Liu. 'Employees may be forced to delay contributing to retirement accounts, investing for future goals, or saving for major purchases — creating lasting gaps in financial well-being, even after their loan obligations are fulfilled.' Public sector employees often have more access to student loan forgiveness programs, such as the Public Service Loan Forgiveness (PSLF) program, which forgives federal student loans after 120 consecutive qualifying monthly payments for employees of qualified government agencies or nonprofit organizations. However, less than one-third (29%) of public sector employees surveyed received information about PSLF from their employer. Moreover, nearly half (48%) of all employees reported their employers did not provide debt management resources, with slightly higher rates in the private sector (49%) compared to the public sector (42%). Given these findings, the Institute's study emphasizes the need for private sector employers to offer more resources on student loan debt management and relief programs. In addition, public sector employers should enhance PSLF communication and support strategies to help employees navigate the application process and utilize the available programs effectively. 'Comprehensive debt management support, financial literacy education, and personalized counseling services are all opportunities where employers can offer support for their workforce, particularly those in the public sector,' added Liu. 'To help improve financial outcomes for all workers, employers and policymakers need to not only offer these resources, but ensure they guide their workforce in understanding them as well.' This research report leverages primary data from 2,036 public and private sector employees collected by MissionSquare Research Institute in collaboration with Greenwald Research from April to May 2024. The survey was designed to collect information on how student loans impact financial well-being, retirement readiness, and career decisions. The respondents were almost evenly split between public sector employees (1,001 respondents) and private sector employees (1,035 respondents). Other key variables included education, occupation, job tenure, level of student debt, and the impact of that debt on their personal finances and career paths. About MissionSquare Research Institute MissionSquare Research Institute promotes excellence in state and local government and other public service organizations to attract and retain talented employees. The organization identifies leading practices and conducts research on retirement plans, health and wellness benefits, workforce demographics and skill set needs, labor force development, and topics facing the nonprofit industry and education sector. MissionSquare Research Institute brings together leaders and respected researchers. More information and access to research and publications are available here. About MissionSquare Retirement Since its founding in 1972, MissionSquare Retirement has been dedicated to simplifying the path to retirement security for public service employees. As a mission-based financial services company, we manage and administer over $72.0 billion in assets.* Our commitment to delivering results-oriented retirement plans, education, investments, and personalized advice sets us apart. Explore how we enable public service workers to build a secure financial future. For more information, visit *As of Dec. 31, 2024. Includes 457(b) plans, 401(a) plans, 403(b) plans, Retirement Health Savings plans, Employer Investment Program plans, affiliated IRAs, and investment-only assets.
