New MissionSquare Research Institute study shows public sector workers feel the strain of student loan debt more than private employees

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 www.missionsq.org.

*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.

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