Expanding accessibility to a college degree for groups that have been historically underrepresented in higher education isn’t enough to close opportunity gaps. New data shows how student loan debt perpetuates long-standing inequities, ultimately preventing under-resourced groups from achieving the same life outcomes as their peers. 

Underrepresented groups most affected by student loan debt

Data we collected in partnership with our Accelerator client Savi, a social impact technology startup, revealed that those who hold debt but haven’t earned a bachelor’s degree, women, African American and/or Black individuals, and Hispanic and/or LatinX individuals* are most affected by student loan debt. 

In our survey of over 3,000 student loan borrowers, 43% of all borrowers reported struggling with student loans before the pandemic payment pause. But struggle was particularly high among Black (57%) and LatinX (47%) borrowers, borrowers without a bachelor’s degree (52%), and women (47%). In contrast, only 36% of the respondent group that was mostly white, 34% of respondents with at least a bachelor’s degree, and 40% of men reported struggling. 

Struggle repaying loans has significant mental health repercussions. Almost one-quarter of all borrowers reported regret about taking out loans, over 40% experienced stress, 20% reported hopelessness over repaying loans, and less than 40% said their education was worth the financial cost. Women, Black and LatinX borrowers, and those without a bachelor’s degree experienced higher levels of regret, stress, and hopelessness, and perceived less worth in their education.

How student loan debt perpetuates cycles of inequity

While we’ve made progress in improving access to higher education for students from under-resourced communities in recent years, decades of inequity have left a mark. Based on our research, the impact of student loans has long-lasting — and potentially generational — financial, personal, and psychological effects on borrowers’ lives, especially among particular groups of borrowers, such as Black and LatinX borrowers, women, and borrowers without a bachelor’s degree. 

We know that inequality persists across generations. Historic labor injustice, long-standing inheritance laws, and the significance of social networks mean that some families not only have more financial capital to pass on but also more privileged experiences and social networks to share with their children.

For some borrowers, therefore, it can take generations for a degree to pay off. It’s no wonder many are questioning whether higher education is worth it. With better support for student loan borrowers, however, we can make progress on closing these inequity gaps. 

Supporting student loan borrowers

Policy leaders, student advocates, and higher education institutions all have a role to play in changing the disproportionate impact of student loan debt on borrowers. Potential solutions include:

  • College affordability: After adjusting for currency inflation, college tuition has increased almost 750% since 1963. If college costs less, borrowers would have lower loan amounts and be able to pay them off faster. Providing more affordable higher education options will require reimagining learner pathways to become more flexible and provide marketable skills more quickly. 
  • Wrap-around support: Helping students with non-education-related basic needs expenses like rent, food, and utilities is directly tied to student success, especially for learners furthest from opportunity.
  • Financial literacy: In another report, we found that many borrowers faced a significant information gap about repayment support and options. Borrowers need better information on and support with loan repayment options. This responsibility must be shared by higher education institutions, borrower advocates, loan providers, and, even, employers who play an important role in establishing their employees’ long-term financial wealth through their employee benefit programs.
  • Employer support: Supporting employees with their student loan debt can benefit employers and reduce voluntary turnover expenses. Federal programs allow employers to do more than educate their employees on student loan repayment. Federal policies give employers a tax incentive to assist with their employee’s loan repayment. Public sector and non-profit employers can certify their employees as eligible for loan forgiveness. And, with the Secure 2.0 Act that went into effect early this year, employers can now accept their employees’ student loan payments as the match payment for their retirement account, allowing borrowers to build retirement by paying back their student loans. 

Investing in education should lift you up, not drag you down. But for borrowers who haven’t earned a bachelor’s degree, women, Black individuals, and LatinX individuals, student debt can become an anchor. Improving access to opportunity shouldn’t require drowning in debt. To truly expand access to opportunity, we must take a hard look at what education is costing students today and push for a combination of policies and financial support that lets students invest in their future — without putting it at risk.

*In the course of this blog, we refer to African American and/or Black individuals as Black individuals and Hispanic and/or LatinX individuals as LatinX individuals to allow for easy access to our language and highlight our findings