In the national policy discussions of the past year over student debt, the focus is often on the individuals – the choices they made to pursue education, incur debt, and then their process for paying off that debt. 

However, for local governments, the issue of student debt extends beyond individuals. It also impacts morale, employee stress, and workforce retention.

MissionSquare Research Institute conducted two studies in 2024 on student debt. The first, Student Debt in State and Local Government: Impacts on Select Occupations, considered typical entry-level education and student debt for degrees typical of hard-to-fill positions, such as in engineering, IT, nursing, and criminal justice. 

Degrees are not the sole pathway to careers, and in fact, local and state governments have been reevaluating whether to drop certain degree requirements. Still, public sector employees are much more likely to have a bachelor’s degree or higher (71%) than those in the private sector (54%).[1] Even in occupations where higher education may not be required, some level of study remains common. In the research institute’s study of state and local employees 35 and under, among those working in public safety, 11% had some college education, 12% had an associate’s degree, 49% had a bachelor’s degree, and 11% had a graduate or professional degree.[2]

The second student debt study, Student Debt Impacts on Public and Private Sector Employees, considers how many people have student debt, how that impacts their financial situation, and  crucially for employers, how that affects their consideration of leaving for another job. 

Across state and local government, 35% of employees have current student debt (see Figure 1). 

Figure 1: Do you currently have (or have you previously had) student debt (by your field within state/local government; n = 1,001).

Of public sector employees with student debt, 46% view it as a major problem. But what constitutes a ‘major problem?’ While it is easy in the abstract to say a major problem is anything that affects you personally, some specific statistics from the study shed further light:

Table 1: Public sector employees: Financial and career differences, with and without student debt.

In addition, among public sector employees with student loans, over the past six months, 18% have missed one-two payments and another 18% have missed three or more payments.

If your organization is already providing tuition reimbursement, student loan support or other education-related benefits, you might think that employees would understand the value of that. However, public sector employees perceive the private sector as offering better support, while private sector employees think the public sector provides better support.

Why do employees think someone else provides better benefits than they have currently? Perhaps it relates to a lack of open discussion. While some say student debt comes up regularly in the workplace, 35% of public sector employees indicated the topic had never been discussed among their coworkers, and 56% say their employer has never provided them with information about how they might qualify for the federal Public Service Loan Forgiveness (PSLF) program.[3]

In a job market in which 60% of public employees 35 and under are considering leaving their jobs,[4] even small steps around student debt can help employees deal with their financial stresses and see the value of remaining with their current employer.

So what can local governments do? Reevaluating benefits is a first step. Look at what is currently being provided in the way of assistance for current studies and already completed studies. This may take the form of direct financial support, paid time off work to attend classes, matching programs that tie student loan payments to retirement plan contributions, or other creative approaches. You may also want to look at skill-based recruitment that considers a degree as just one of many possible paths to hiring, while also considering equivalent experience, certificate programs, apprenticeships, and post-hiring upskilling.

But beyond policy changes, communication is key. Talk about the value of benefits already provided and why base salary is only a part of overall compensation. Discuss how fairness issues around student debt assistance are no different from the balanced approach to providing other benefits that tend to apply to only a portion of the workforce or those at particular life stages (i.e., paid family leave, home purchase or estate planning assistance, or commuter benefits). And even if federal programs like PSLF seem complex and subject to constant national debate, inform your employees how they might benefit and how they can apply.

Any effort to provide information, clear up misconceptions, and better engage with staff around available benefits can help to reduce financial anxiety as well as mitigate potential turnover.

Listen to Why Local Governments Should Care about Their Employees’ Student Debt 

Learn about ICMA’s partnership with Savi, which can help your local government staff qualify for student debt relief and obtain savings.