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.
What 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.”
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