The Cost of Student Loan Debt: Mental Health and the Workplace

Millions of employees walk into work each day carrying more than just laptops – they’re carrying the weight of student loan debt.

This financial burden doesn’t stay at home; it spills into the workplace, affecting mental health, focus, and even career decisions. Student loan debt is not just a financial issue – it’s a workplace well-being issue.

In this post, we’ll explore how financial stress from student loans impacts employee mental health, productivity, and retention. We’ll also look at what experts say about the anxiety and burnout linked to debt, and why employers have a responsibility and an opportunity to help – including innovative benefits like student loan 401(k) matching.

Finally, we’ll highlight real-world examples of companies leading the way in supporting their employees’ financial wellness.

By the Numbers: How Financial Stress Impacts Work and Well-Being

Financial stress is alarmingly common and it directly affects employees’ health and job performance. Consider these key statistics that show the link between money worries, mental health, and work:

• Money is a top stressor: Roughly 60% of full-time employees report being stressed about their finances (Financial Wellbeing Increases Productivity | Human Resources | Baylor University). In fact, surveys consistently find that financial worries are the number one cause of stress for employees, ahead of other stressors (2023 Employee Financial Wellness Survey: PwC ). This stress isn’t just a minor annoyance – it has tangible effects on mental and physical health, from lost sleep to anxiety and depression (Financial Wellbeing Increases Productivity | Human Resources | Baylor University).
  
  
• Mental health suffers: Nearly half of financially stressed employees say that money concerns have had a severe or major impact on their mental health in the past year (Student Loan Debt Adds to Employee Financial and Mental Health Stress). The burden of student debt in particular contributes to prolonged stress, feelings of shame, and even serious mental health crises. Alarming data from a 2021 survey showed 1 in 14 student loan borrowers had experienced suicidal thoughts because of student loan stress (Student Loan Debt Adds to Employee Financial and Mental Health Stress) – a stark reminder of how extreme this pressure can become.
  
  
• Productivity plummets with financial stress: When employees are preoccupied by debt, their work suffers. Over half (56%) of workers who feel financially stressed admit they spend three or more hours each week at work dealing with or thinking about personal finances (Student Loan Debt Adds to Employee Financial and Mental Health Stress). That lost productivity adds up. It’s no surprise that about one in three employees say financial stress has negatively affected their productivity on the job (Financial Wellbeing Increases Productivity | Human Resources | Baylor University). Distracted and anxious, they struggle to focus on work tasks.
  
  
• Engagement and retention are at risk: Employees facing money problems often feel less engaged and are more likely to leave. Financially stressed employees are twice as likely to be looking for a new job compared to their unstressed peers (36% vs 18%) (2023 Employee Financial Wellness Survey: PwC ). They also report lower confidence in their future at the company and less sense of belonging. In one survey, 73% of financially stressed employees said they’d be attracted to another employer that cares more about their financial well-being (2023 Employee Financial Wellness Survey: PwC ). In other words, if you’re not helping employees with their financial stress, they may seek an employer who will.
  
  
• Employer perceptions align with this reality: HR leaders see the fallout too – 63% of HR professionals say employees who are financially stressed perform worse at work (The state of employee financial stress and its impact on performance | HR Dive), and almost 80% believe financial stress at least somewhat impacts employees’ mental health and morale (The state of employee financial stress and its impact on performance | HR Dive). It’s clear that personal finance woes aren’t just personal; they affect team performance and company culture.

These numbers paint a clear picture: financial stress and mental health are tightly interwoven, and the workplace is feeling the effects. When employees are worried about making student loan payments or paying bills, their well-being declines and so does their work output.

Debt, Anxiety, and Burnout: What the Experts Say

Statistics only tell part of the story. To truly understand how student loan debt fuels anxiety and burnout, we need to hear from the experts who see this pattern firsthand. Mental health professionals and financial wellness experts agree: debt-related stress can spiral into serious psychological strain and disengagement at work.

“So often in the mental health field we might not think about financial stress, but there’s actually really strong links between financial stress and mental health,” says psychologist Myra Altman, Vice President of Clinical Care at Modern Health (Student loan debt is crushing employees’ mental and financial wellness | Employee Benefit News). Altman explains that money problems and mental health feed into each other, creating an endless cycle of worry.

Financial stressors worsen mental health, and at the same time, mental health struggles make it harder to manage finances– a double bind for employees with heavy debt. This cycle can manifest as anxiety, depression, or burnout, as workers feel trapped by their obligations.

Financial insecurity can also breed feelings of shame and guilt. “We tend to think it's just a money thing. But it’s not. It’s a hope thing,” notes Todd Schmiedeler, a chief engagement officer who has seen employees delay life milestones due to student debt (Student loan debt is crushing employees’ mental and financial wellness | Employee Benefit News).

Employees may blame themselves for their debt or feel ashamed about struggling, which can prevent them from seeking help. Over time, this chronic stress and self-blame erode emotional well-being and motivation.

Instead of feeling excited about their future after earning a degree, workers with large loans often feel anxious, stuck, and unable to fully celebrate their achievements.

The link between student loans and burnout is increasingly evident. Juggling hefty monthly loan payments alongside rent, groceries, and other living expenses is exhausting. Workers might take on overtime or side gigs to keep up, leaving little time for rest or self-care. This grind can quickly lead to burnout – emotional exhaustion, cynicism, and reduced efficiency on the job. In high-debt professions (for example, healthcare or education), young employees report feeling constant pressure to keep working just to manage their loans, contributing to higher burnout rates (How Student Loans Affect Healthcare Professionals).

On the flip side, when employees get relief from financial stress, their mental health and engagement often rebound. Reducing money worries can lift that “storm cloud” hovering over the workplace (The state of employee financial stress and its impact on performance | HR Dive). The takeaway from experts is clear: addressing financial stress is a critical component of supporting employees’ mental health.

Debt may start as a financial issue, but if left unchecked, it can snowball into anxiety, burnout, and disengagement that hurt both the individual and the organization.

The Employer’s Responsibility (and Opportunity) to Help

What is the role of employers in all this? Given the impact of financial stress on employees’ well-being and performance, many experts argue that employers have a responsibility to help employees manage these challenges. After all, companies invest in health insurance and wellness programs to keep employees physically healthy – why not invest in financial wellness to keep them mentally healthy and focused?

It’s unrealistic for employers to expect people to “leave money problems at the door.” As one HR leader put it, you can’t expect employees to bring their best selves to work when they’re struggling to pay the rent or buy groceries (Student loan debt is crushing employees’ mental and financial wellness | Employee Benefit News).

Employers who ignore financial stress risk a less productive, less engaged workforce. On the other hand, employers who take action stand to gain a more loyal and focused team. In fact, the vast majority of employers recognize this: 97% of employers in one large survey said they feel responsible for their employees’ financial wellness (Bank of America Study Finds 84% of Employers Now Say Offering Financial Wellness Tools Helps Increase Employee Retention).

And that sense of responsibility is backed by business sense – 84% of employers say offering financial wellness tools helps reduce employee attrition (turnover) (Bank of America Study Finds 84% of Employers Now Say Offering Financial Wellness Tools Helps Increase Employee Retention).

There’s a strong business case for addressing student loan stress. Benefits like student loan assistance can reduce turnover, absenteeism, and improve productivity, notes Greg Poulin, CEO of student loan benefit provider Goodly (Student loan debt is crushing employees’ mental and financial wellness | Employee Benefit News).

When employees aren’t constantly anxious about money, they can be more present and engaged in their work. Supporting financial wellness is not just a perk; it’s a strategic move to boost morale and retention.

According to a recent Bank of America Workplace Benefits Report, 91% of employers saw higher employee satisfaction when they offered resources to manage overall well-being, including finances (Bank of America Study Finds 84% of Employers Now Say Offering Financial Wellness Tools Helps Increase Employee Retention). Financial wellness benefits can pay dividends in the form of happier employees who stick around.

Crucially, employees want and expect this help. Surveys find that 81% of employees believe their employer should invest in their financial wellness (The state of employee financial stress and its impact on performance | HR Dive), and many younger workers even factor this into their job choices.

In one poll, 69% of new graduates said the burden of student loans will influence what jobs they consider after college (Student Loan Debt Adds to Employee Financial and Mental Health Stress).

Another survey found 6 in 10 workers with student debt would consider switching companies if it meant accessing a student loan benefit (Got Student Debt? We've Got You | Abbott Newsroom). The message is loud and clear: offering financial wellness support (like student loan repayment assistance, financial coaching, or other tools) is a powerful way to attract and retain talent.

It’s become a competitive advantage in recruiting, not just a nicety.

From 401(k) Matching to Counseling: New Ways to Support Financial Wellness

Fortunately, employers have more options than ever to help alleviate employees’ student debt stress. Traditional programs like tuition reimbursement or student loan repayment bonuses are one route. But a game-changing new option has emerged: allowing employees to convert student loan payments into 401(k) retirement contributions.

Thanks to the 2022 SECURE 2.0 Act, companies can now offer a 401(k) match based on an employee’s student loan payments. In practice, this means if an employee is paying, say, $200 a month toward their loans and can’t afford to contribute to the 401(k), the employer can still deposit a matching contribution into the employee’s 401(k) as if those loan payments were salary deferrals.

It’s a win-win – employees pay down debt and build retirement savings, and employers help improve workers’ long-term financial outlook without increasing payroll costs (Student Loan Payments and 401(k) Matches: Debunking Common Secure 2.0 Misconceptions).

This kind of creative benefit addresses a major concern: research shows many people with student loans forgo saving for retirement. For example, about 42% of adults with student loans aren’t saving for retirement because of their debt (Got Student Debt? We've Got You | Abbott Newsroom).

A student loan 401(k) matching program tackles that problem head-on. Early adopters have found it hugely popular – Abbott Laboratories, which pioneered a similar program before the law even allowed it, saw thousands of employees enroll and significant sums going into participants’ 401(k)s.

Now, with the legal green light, more employers can follow suit. Yet today fewer than 5% of companies offer a student loan 401(k) contribution program (making it a prime opportunity for forward-thinking employers to differentiate) (Loan Certify Capabilities).

Of course, 401(k) matching is just one approach. Financial wellness benefits can also include direct student loan repayment contributions (the company directly pays down a portion of employees’ loans), refinancing assistance, personal finance coaching, budgeting workshops, and tools to navigate repayment and forgiveness programs.

68% of employers now provide some form of financial wellness resources – from coaching to online tools – up from 51% a decade ago (Student Loan Debt Adds to Employee Financial and Mental Health Stress). The trend is clear: employers are increasingly stepping up to ease financial stress for their teams.

For employers, the key is to treat financial wellness as part of a holistic well-being strategy, on par with physical and mental health programs. The return on investment comes in the form of increased employee engagement, loyalty, and productivity.

As Scott Thompson, CEO of Tuition.io, put it, “You can’t say I’ll suffer today and enjoy it later…we bump into this a lot,” referring to employees putting life on hold due to debt (Student loan debt is crushing employees’ mental and financial wellness | Employee Benefit News). Companies have an opportunity to remove that suffering from the equation by extending a hand in the form of financial support.

Real-World Examples: Companies Supporting Employee Financial Wellness

Employers across various industries have started implementing financial wellness benefits – with promising results for employee mental health and retention. Here are a few real-world examples and case studies that highlight the impact of easing student loan stress:

• Trilogy Health Services: This healthcare company introduced a student loan repayment benefit through a partnership with Tuition.io. Leadership noticed that student debt was “impacting [employees] financially and mentally, as well as affecting how well they did their jobs,” according to Todd Schmiedeler, Trilogy’s Chief Engagement and Innovations Officer (Student loan debt is crushing employees’ mental and financial wellness | Employee Benefit News). After rolling out the benefit, the company saw a clear payoff: retention levels increased and employees became happier. Workers shared that the assistance gave them hope – one employee finally felt comfortable planning to buy a house; another felt able to propose to his girlfriend once his debt was under control. By directly addressing a source of stress, Trilogy boosted morale and loyalty among its staff.

• California Community Foundation (CCF): CCF’s Vice President of HR, Tina Walker, personally struggled with significant student loans – an experience that motivated her to advocate for her organization to help employees with their debt. She convinced CCF to partner with Goodly, a platform that enables direct employer contributions to employees’ loans (Student loan debt is crushing employees’ mental and financial wellness | Employee Benefit News). Leadership agreed, opting to contribute at a generous level. For CCF, it was a “no brainer” decision to offer this support, seeing it as a way to invest in their employees’ future and well-being. This example shows that even non-profits on tight budgets are finding ways to make student debt benefits work, recognizing the human impact behind the numbers.

• Abbott Laboratories: Abbott was a pioneer with its “Freedom 2 Save” program, which launched in 2018. Under this initiative, Abbott contributes 5% of an employee’s salary to their 401(k) if the employee puts at least 2% of their pay toward student loans (Got Student Debt? We've Got You | Abbott Newsroom). This effectively mimics a 401(k) match for student loan payments – years before SECURE 2.0 made it more common. The response was overwhelming: within a year, over 1,000 employees had signed up, and many were able to shave an estimated three years off their loan repayment time while also accumulating tens of thousands of dollars in their retirement accounts. Abbott’s internal research found that 90% of college students with loans said they are looking for employers with a student debt benefit, validating the appeal of the program. Moreover, 60% of workers with student loans indicated they would consider switching jobs to get a benefit like this. Abbott’s case became a catalyst for broader change, showing that helping employees with debt can be a powerful tool to attract young talent and support long-term financial health.

• PricewaterhouseCoopers (PwC): In 2016, PwC became one of the first big firms to offer a student loan paydown benefit, giving employees up to $1,200 a year toward their loans. Over the years, PwC has reported improved recruitment and retention of early-career professionals as a result. Many employees have expressed relief that their employer recognized the weight of student loans and took action to help. PwC’s annual financial wellness surveys further underscore why such benefits matter: in 2022, nearly one-third of employees who were stressed about finances said they had considered looking for another job (2023 Employee Financial Wellness Survey: PwC ) (2023 Employee Financial Wellness Survey: PwC ). By proactively addressing a top stressor, PwC strengthened its employer brand and demonstrated care for employees’ overall well-being.

These examples scratch the surface, but they all share a common theme: when employers invest in alleviating student debt and financial stress, employees respond with higher engagement, gratitude, and loyalty.

Whether it’s through a high-tech solution like 401(k) matching or a straightforward loan repayment contribution, the companies that have tried it report better retention and a workforce that’s freer to focus on work (and life) rather than worrying about debt.

Supporting financial wellness is truly a win-win: employees get peace of mind and a brighter financial future, while employers benefit from a more stable, productive team.

Bottomline: Prioritizing Financial Wellness for a Healthier, Happier Workforce

Student loan debt may be a personal financial issue, but its ripple effects clearly reach into the workplace in the form of stress, distraction, and diminished well-being. The good news is that employers are in a unique position to break the cycle.

By recognizing the mental health toll of student debt and offering meaningful financial wellness benefits, companies can foster a more engaged and resilient workforce. From the data and expert insights, one thing is evident: when employees feel supported in managing their finances, they can bring less stress and more of their true potential to work.

Forward-thinking employers have a golden opportunity to boost productivity and loyalty simply by helping employees tackle a burden that’s been holding them back. Whether it’s implementing a student loan 401(k) matching program, providing direct loan repayment assistance, or offering financial education resources, any step toward easing employees’ financial stress is a step toward a healthier, happier team.

Ready to learn more about how you can turn the student debt crisis into an opportunity for your organization?

Take the next step toward empowering your team’s financial future – download Loan Certify’s Capabilities Deck or White Paper for further insights and a deep dive into implementing financial wellness benefits.

These resources explore best practices, real-world results, and actionable strategies to seamlessly support your employees’ financial well-being (at zero cost and zero hassle to your company). Don’t let student loan stress quietly undermine your workforce.

It’s time to take action – and with the right tools, you can make a lasting positive impact on both your employees’ lives and your organization’s success.

Empower your employees by helping to lift the weight of student loan debt – and watch as improved mental health and engagement transform your workplace. Your team’s financial wellness is not just their personal gain, but a business gain too.