A new report from MissionSquare Research Institute finds student loan debt influences job acceptance decisions for 56% of public sector employees and 62% of private sector employees. The data also reveals that student loan debt negatively affects employee retention. Employees with student loan debt are less likely to remain with their current employer compared to those without student loan debt (39% versus 61%), with a more pronounced impact in the public sector.
These findings are detailed in a new research report, The Ripple Effects of Student Debt: Shaping Careers, Financial Choices, and Well-being in Public and Private Sectors. The report’s first section focuses on employment decisions and perceptions, while the second portion examines various aspects of employees’ financial decision-making.
“Student debt is a significant issue in the U.S., impacting various aspects of workers’ lives. Our analysis clearly shows the adverse impacts of student loan debt in multiple areas for both public and private sector workers,” says Zhikun Liu, Ph.D., CFP, head of MissionSquare Research Institute, and author of the report. “Student loan debt negatively impacts employment decisions concerning job acceptance and retention. Moreover, some employees believe that their student debt has limited their career advancement opportunities, and employees with student debt are more likely to report lower work morale compared to those without it.”
Additional key findings from the report are below.
- Employees with student debt perceive the debt as a barrier to their career advancement, with 35% of females and 31% of males in the public sector, and 28% of females and 43% of males in the private sector, reporting limited career progression due to their debt.
- Student loan debt is associated with a higher likelihood of reporting a negative work morale, particularly in the public sector, where 23% of employees with student debt report negative work morale compared to 18% of their peers without such debt.
- Employees who pursue professional development goals, such as acquiring new skills, supervisory/managerial roles, additional education or certifications, and increased responsibility, are more likely to have student loan debt compared to those who do not pursue these goals.
- Many student debt holders across sectors do not invest at all, and those who do are more likely to choose short-term investment options.
- Employees with student debt tend to have shorter financial planning horizons than those without student debt.
- Compared to their peers without student debt, employees with student debt in the public and private sectors are more likely to perceive their retirement savings as inadequate, with public sector employees being 14% more likely and private sector employees 9% more likely to strongly agree.
“It’s also troubling to see that student debt triggers an emphasis on short-term planning, short-term investment, or not investing at all. This restricts student debt holders’ opportunities to benefit from investment compounding, hindering their ability to accumulate wealth. There clearly is a need for better financial planning strategies that consider the burden of debt and its corresponding influences on short- and long-term financial goals,” Liu says.
