Student loan debt is a key influencer in U.S. worker decisions to accept and stay in jobs, new MissionSquare Research Institute study finds

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 debt are less likely to remain with their current employer compared to those without student debt (39% vs. 61%), with a more pronounced impact in the public sector.

These findings are detailed in a new research report, The Ripple Effect 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. The report is authored by Zhikun Liu, PhD, CFP®, Head of MissionSquare Research Institute, and Thomas Korankye, PhD, CFP®, Assistant Professor of Personal and Family Financial Planning at the University of Arizona. Read the report.

“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,” Liu said. “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.

“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 said.

Additional report findings are as follows:

• Career Advancement: 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.

• Work Morale: 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.

• Professional Development: 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.

• Investment Approach: Many student debt holders across sectors do not invest at all, and those who do are more likely to choose short-term investment options.

• Financial Planning Horizons: Employees with student debt tend to have shorter financial planning horizons than those without student debt.

• Perception of Retirement Savings Adequacy: 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.

The report uses a proprietary survey data set collected by MissionSquare Research Institute in 2024 (N=2,036) and employs descriptive statistics and regression techniques in the analysis. Overall, the findings provide a comprehensive understanding of the multifaceted ways student debt shapes financial behaviors, and career decisions and perceptions, offering valuable insights for employers to consider regarding the financial well-being of their employees.

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 at research.missionsq.org.

About MissionSquare

Since our 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 financial education sets us apart. Explore how we enable public service workers to build a secure financial future. For more information, visit www.missionsq.org or follow the company on Facebook, LinkedIn, and X.

*As of December 31, 2024. Includes 457(b) plans, 401(a) plans, 403(b) plans, Retirement Health Savings plans, Employer Investment Program (EIP) plans, affiliated IRAs, and investment-only assets.