High levels of student debt should not just be worrisome to public sector employees, who find themselves facing the burden of repaying the cost of their education. They should also be a topic of concern – and a potential opportunity – for their employers. 

“We should start treating this problem more seriously,” said Zhikun Liu, head of research for MissionSquare Research Institute, in a November 21 webinar that focused on ways employers could potentially improve recruitment and retention by better addressing student debt.

A series of MissionSquare surveys have focused on this topic, illustrating levels of student debt, particularly in hard-to-hire professions, and some clear differences between the public and private sectors.

In fact, according to MissionSquare’s recent report, Student Debt Impacts on Public and Private Sector Employees. “Public sector staff are more likely to view student loan debt as a major factor in considering whether to seek other employment” – 38% compared to 25% of those in the private sector.

The message: With state and local governments carrying more educational debt and bigger financial worries than their private counterparts, impact on the employee-employer relationship and employee morale is potentially greater. “The purpose of this webinar is to bring awareness (to) the public sector employers and HR managers,” Liu said.

As researchers wrote in an executive summary to the report, student debt is “an essential consideration for public employers and closely related to employee financial wellbeing, staff development and retention.”

A few facts:

• In the public sector, 71% of employees have a bachelor’s degree or higher compared with 54% in the private sector. (While this gap may be closing due to a strong effort to reduce college degree requirements, it is still large.)

• “Overall, state and local employees are more likely to have current or prior student loan debt (62%) than are private sector employees (52%)

• In the public sector 31% of employees have a student loan balance that’s greater than $50,000 compared to 23% in the private sector

• When asked if they have money left over at the end of the month, 39% in the private sector said yes compared to 26% of K-12 employees, 30% of those in public safety and 37% in other state and local jobs.

• Taken as a whole, 18% of state and local employees feel extremely or very financially secure compared to 26% in the private sector.

One of the problems pointed out to employers in the webinar was that student debt is not widely talked about among employees. The lack of attention is particularly notable for the public sector because the Federal Loan Forgiveness Program provides a benefit that’s focused on those employees. While it’s had a somewhat rocky implementation history, it provides loan forgiveness of the remainder of balance owed, to direct loan borrowers who have worked in the public sector for 10 years and have made regular payments on their student loans during that time. 

But when the research institute questioned public sector employees about this benefit, less than 30% said their employers had talked about it with them. “This is interesting because this benefit should be unique to the public sector,” Liu said, noting that it could be a good recruitment and retention tool.

There are different approaches in both public and private sectors to dealing with educational debt. 

In the public sector, tuition reimbursement programs have focused more on continuing education while employed. That benefit is more common for state and local government employees than their private counterparts (52% vs. 43%). On the other hand, a new student loan matching program is gaining more attention in the private sector vs. the public sector (25% vs. 13%). It allows employers to provide a matching educational benefit (or a match to a retirement plan) when employees have directed student loan repayments to be made from their paychecks.

Interestingly, both private employees and those in state and local government believe that the other sector does a better job of providing student debt benefits. Given the higher level of student debt and greater financial worries in state and local government, more attention and more creative approaches would be helpful, according to the research institute.

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