AIG Retirement Services Study Finds Strong Awareness but Minimal Understanding of Public Service Loan Forgiveness Program
AIG Retirement Services Works with Tax-Exempt and Public Sector Employers to Close Student Loan Knowledge Gap
Millions of public sector and nonprofit workers including teachers, healthcare workers and first responders may be eligible for student loan forgiveness through PSLF, but confusion around the program appears to be undermining its efficacy. While 90% of public service employees with college debt indicate awareness of the program, 70% exhibit only a minimal understanding of its rules and requirements.
This gap is important because more than one in six American adults carry a federal student loan, according to the most recent figures from the New York Federal Reserve’s
“The Public Service Loan Forgiveness program is a powerful tool for Americans who have chosen to spend their careers dedicated to service and community,” said
Student Loan Debt the Top Cause of Financial Stress; PSLF a Financial Lifeline for Public Sector Employees
Student debt ranks as the top cause of financial stress for public service employees who are carrying loans from their college years. Nearly eight in ten (78%) characterize student loan debt as a major financial burden. Further, two out of three (66%) name student loans and the corresponding monthly payments as a financial worry, beating the next highest concern by an enormous 22 percentage points (credit card debt at 44%).
With these concerns as the backdrop, public service employees see the PSLF program as a lifeline critical to their financial wellbeing. Over one out of three (34%) say it will be the only way they will be able to pay off their debt in a reasonable amount of time, and 64% say it will reduce financial stress.
Furthermore, a significant number of public service employees would use the money otherwise spent on monthly student loan payments for other significant financial responsibilities—over half (51%) say that they would most likely use the funds to pay off other debt; 47% would contribute to retirement savings and investments; and 43% would add to their emergency savings fund.
Despite Support for PSLF, Program Barriers Persist
There is clear support for the PSLF program, with 68% of respondents indicating they are likely or very likely to work toward meeting its qualifications. Three out of four (77%) expect to tell others about the program, and 84% find the program appealing with half of those saying it is very appealing.
But despite this enthusiasm, there are significant hurdles to successfully participating in the program. The survey respondents indicate that the top barrier to achieving loan forgiveness through PSLF is confusion about the program (34%). Other challenges are maintaining qualification over time (34%) and the number of required payments (31%).
The PSLF program’s own reporting shows how these expected barriers have played out as the vast majority of program applicants have had their efforts to seek loan forgiveness rejected. As of
Opportunity for Public Service Employers to Improve Financial Security for Employees
Despite these clear challenges, opportunities remain. There is a substantial opportunity for public service employers to help their employees take control of their student loan debt. Only 12% of public sector employees who are carrying student loan debt receive information from their employer about the Public Service Loan Forgiveness program.
“We understand the long-term impact student loan debt can have on financial and retirement security, which is why we are proud to be working with Savi to help employers empower their workforce to take control of their student loan debt,” Scheinerman continued. “The new program can chart the path for nonprofit and public service employees to loan forgiveness, helping to improve their financial future and creating enhanced flexibility around other goals, including saving for retirement.”
To see more findings from the student loan forgiveness survey and related analysis, visit lifeandretirement.aig.com/employers/lp/the-public-service-loan-forgiveness.
2 Consumer Credit G.19.
3 Income-Driven Repayment Plans for Student Loans: Budgetary Costs and Policy Options.
4 Federal Student Aid Portfolio Summary,
For more than half a century,
Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIGinsurance www.twitter.com/AIGinsurance | LinkedIn: www.linkedin.com/company/aig. These references with additional information about AIG have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of
View source version on businesswire.com: https://www.businesswire.com/news/home/20210224005592/en/