The Student Loan Crisis and Its Impact on Borrowers

By Charles Knuth · March 15, 2024 · 4 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

The Student Loan Crisis and Its Impact on Borrowers

A recent research report from WGU Labs titled “Drowning in Debt: Student Loans Weigh Down Borrowers” sheds light on the alarming state of student loan debt in the U.S. The report highlights the disproportionate impact on borrowers who did not complete a bachelor’s degree, women, Black individuals, and LatinX individuals. With student loan debt surpassing a staggering $1.7 trillion in 2023, it is evident that the current system is failing borrowers and requires urgent attention.

Key Findings

1. Struggles with Repayment

The report reveals that 43% of borrowers surveyed were struggling with student loan repayment even before the payment pause. This struggle was particularly high among Black and LatinX borrowers, those without a bachelor’s degree, and women. Additionally, over 10% of respondents were in default, with borrowers without a bachelor’s degree and Black respondents being more likely to be in default.

2. Toll on Mental Well-being

The burden of student loan debt affects borrowers’ mental well-being. Higher levels of regret, stress, and hopelessness were reported among women, Black and LatinX borrowers, and those without a bachelor’s degree. Furthermore, less than 40% of respondents believed their education was worth the financial cost. (Note: this is also covered extensively in SoFi at Work’s Student Debt and the Impact on Mental Health.)

3. Financial & Personal Milestones Delayed

Student loans delay important financial milestones for borrowers, such as saving for retirement, buying a home or car, and achieving financial security. Respondents with at least a bachelor’s degree who took out student loans had significantly fewer financial assets than those who never did.

Though not to the same extent as financial milestones, student loans can also delay personal life milestones. Borrowers with at least a bachelor’s degree and men reported higher levels of delay. Interestingly, when asked about pursuing future education, there was also a disparity among borrowers: Those without a bachelor’s degree expressed a greater need for further education, while Black borrowers, LatinX borrowers, and men were more likely to plan on pursuing additional education.

Calls to Action

The report concludes with two crucial calls to action to address the student loan crisis.

1. Educate Borrowers on Repayment

Borrowers, especially those without a bachelor’s degree, need better information and support regarding loan repayment options. Higher education institutions, borrower advocates, and employers can all play a role in providing this education and support.

Take advantage of free resources, such as:

•   SoFi at Work Guide to Student Loan Repayment

•   SoFi at Work’s Navigating Your Student Debt Workbook

2. Expand Employer Student Loan Benefits

Employers can make a significant impact by offering student loan repayment assistance as part of their employee benefit programs. Federal policies provide tax incentives for employers to assist with loan repayment, and public sector and nonprofit employers can certify employees for loan forgiveness. Streamlining the eligibility process and encouraging employers, particularly those with low-wage workforces, to offer debt repayment programs is crucial.

Recommended: Helping Employees Make Smart Student Debt Decisions: The Urgent Need for HR Support

Additionally, SoFi at Work would recommend:

3. Expand Access to Tuition Reimbursement Programs

Launching a tuition reimbursement program can be a game-changer for your organization, attracting and retaining top talent while fostering employee growth and engagement. It can also address some challenges with student debt head-on by supporting employees’ educational aspirations before they must take on debt. While a number of large employers offer this benefit, it has historically been an underutilized resource in the effort to reduce the student debt burden.

Leverage the New Secure 2.0 Act Provisions

The Secure 2.0 Act, which became law in 2022, is primarily designed to encourage more American workers to save for retirement. However, one of the Act’s key provisions is formally authorizing matching contributions for student loan repayment, allowing companies to match employees’ qualified student loan payments with contributions to their retirement accounts. This is yet another tool employers can access when alleviating the stress of employees’ student loan debt.

Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?

The Takeaway

The WGU Labs research report highlights the dire consequences of the student loan crisis on borrowers, particularly those without a bachelor’s degree, women, Black individuals, and LatinX individuals. While recent efforts to forgive debt and create more manageable repayment programs are steps in the right direction, a comprehensive reform of the student loan system is needed. Policy leaders, student advocates, and higher education institutions must work together to find bold solutions that alleviate the burden of student loan debt and make higher education more accessible and affordable for all.

SoFi at Work can help. We’re experts in the employee education assistance space. With SoFi at work, you can access platforms and information that will help build the benefits needed to create a successful and loyal workforce.

Photo credit: iStock/valentinrussanov

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery, or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), ( ). The Student Debt Navigator Tool and 529 Savings and Selection Tool are provided by SoFi Wealth LLC, an SEC-registered investment adviser. For additional product-specific legal and licensing information, see 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2024 Social Finance, LLC. All rights reserved. Information as of April 2024 and is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.


All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender