Student Loan Burden Lingers Beyond Repayment—Especially for Private Sector Workers

Many Americans remain concerned about the long-term cost of higher education. While former President Joe Biden’s administration rolled out loan forgiveness initiatives and updated income-driven repayment plans, recent restructuring efforts within the Department of Education under President Donald Trump have raised concerns about the stability and clarity of student loan aid programs.

A study from the MissionSquare Research Institute found that public sector employees are more likely to carry student loan debt and have higher balances than their private sector counterparts.

Based on a national survey conducted last year of more than 2,000 workers from both sectors, the research report—“How Employer-Provided Resources Can Elevate the Impact of Student Debt Across Sectors”—identified gaps in financial security, retirement preparedness and career choices.

“Balancing competing financial priorities while managing student debt can significantly hinder wealth accumulation,” said Dr. Dennis Liu, co-author of the report and head of the MissionSquare Research Institute, in a statement. “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.”

Impact of Student Loans

While student loan debt affects financial well-being for workers in both sectors, particularly those who still carry balances, the study found that public sector employees are less likely to feel the ongoing financial strain after their loans are paid off, while private sector employees also experience financial strain, even after paying off their loans, reflecting a unique phenomenon called a “debt-overhang” effect.

One explanation is the cost of repayment during critical wealth-building years. These employees have been less able—or unable—to contribute to retirement accounts, invest in the stock market or save for major purchases.

Public sector employees have greater access to loan forgiveness programs, such as the federal Public Service Loan Forgiveness program. But while public sector employees may qualify for programs like PSLF, only 29% of public sector employers make their employees aware of these options, according to the report.

In addition, nearly half (48%) of all employee respondents reported that their employers did not provide debt management resources, with slightly higher rates in the private sector (49%) than the public sector (42%).

In the second quarter of 2025, missed payment risk on student loans increased to 35% (up from 32% last quarter), according to the Federal Reserve Bank of New York. As the U.S. Department of Education ramps up collection efforts on past-due federal student loans, a default wave is coming, according to new reports. One new analysis by TransUnion found that, as of April, 31% of student loan borrowers with a payment due are in “late-stage delinquency,” more than 90 days past due on payments. That is the highest share the credit bureau has ever recorded.

Based on the findings, MissionSquare recommended that private sector employers increase support for student loan debt management and awareness of relief programs. Meanwhile, public sector employers should improve communication about programs like PSLF to help employees fully benefit. Across both sectors, access to general debt management resources was linked to improved financial well-being.

The research report leveraged primary data from 2,036 public and private sector employees (with respondents almost evenly split between the two) collected by the MissionSquare Research Institute in collaboration with Greenwald Research from April and May 2024.