Student Loan Collection Impacts Gen Z Hiring
The resumption of federal student loan collections on May 5, 2025, is expected to significantly impact Generation Z, especially in terms of credit scores and employment opportunities.
Currently, about 5 million borrowers are in default, with an additional 4 million in late-stage delinquency, defined as 91 to 180 days overdue. Defaulting on student loans can result in severe consequences, such as wage garnishment, loss of eligibility for income-driven repayment plans, and long-lasting damage to credit reports. These marks can make it difficult to qualify for loans, rent housing, or even secure employment.
Credit Checks a Part of Hiring Process
Employers in industries like finance, law enforcement, and government often include credit checks as part of the hiring process. While these checks do not show the applicant’s actual credit score, they do reveal key details such as payment history and outstanding debts. A poor credit history may lead employers to question a candidate’s financial responsibility, potentially affecting hiring decisions.
Student loan debt also contributes to heightened financial stress among Gen Z, which can interfere with the job search process. Surveys indicate that many Gen Z job seekers feel forced to prioritize financial necessity over career passion, sometimes accepting positions they’re less interested in due to loan pressures. This financial and psychological strain can lead to delayed employment or reduced effectiveness during job searches.
Verify Status
To navigate these challenges, Gen Z borrowers are encouraged to verify the status of their loans, explore repayment options such as income-driven plans or rehabilitation, and regularly monitor their credit reports. DOGE cuts have made it very difficult to make contact, particularly if you have applied for forebearance and have no response. Start early, be prepared to wait for hours only to be told you have the wrong department. It’s difficult.
In some cases, it may be beneficial to discuss financial circumstances with potential employers, particularly when there are clear explanations for credit difficulties. These steps can help reduce the negative impact of student loan defaults on both financial standing and career development.
