Who is Affected by the Student Loan Crisis and Why?

By Oluwakemi (Kemi) Kehinde

Student loan debt in the United States is on the rise. In 2008, total student loan debt reached $600 billion. A decade later, student loan debt reached $1.5 trillion and is projected to reach $2 trillion by 2023 if the trend continues. Although many studies have attempted to identify the causes of the student loan crisis, less is known about who suffers as a result of it. What kinds of students are most prone to acquire debt and why? Is there a relationship between student loan debt and demographic factors such as age, gender, race, and economic status? Does student loan debt affect who goes to college and who does not? This brief provides an overview of how student loan debt affects different demographics of students and explains how high school guidance counselors and college financial aid officers play an important role in the dissemination of financial knowledge.

Who acquires student loan debt?

Research suggests that student loan debt is related to different social categories including age. According to Ratcliffe and McKerna, who used the National Financial Capability Study (NFCS) to assess student loan debt by educational level, age, race, etc., a higher percentage of people aged 20-29 have student loan debt as opposed to other age groups. According to the authors, millennials may be prone to acquire student loan debt because of the belief that going to college will guarantee a well-paying career.

Family income also plays a role in determining who acquires student loan debt. Although Ratcliffe and McKerna found the probability for student loan debt is roughly the same for both poor/working class (20 percent) and upper class (18 percent) households, a 2014 study found that “young adults from the two highest income brackets ($100,000 to $149,999 and $150,000+) … have significantly less student debt than do young adults from the lowest income category.” Ironically, when compared to those from the lowest income bracket, young adults from the lower-middle-income ($40,000 to $59,000) and higher middle income ($60,000 to $99,000) brackets reported more debt at 59 percent and 30 percent respectively. This conundrum, also known as, the “middle income squeeze,” suggests that middle class students can and do fall into debt because they fail to meet financial aid need-based criteria.

Time spent in college also influences debt levels. Indeed, student loan debt is “slightly higher for those with a college or graduate degree [at] 30 and 28 percent, respectively,” compared to 9 percent of people with no more than a high school degree. Simply put, the more higher education a student attains, the more student loan debt they acquire.

Lastly, race and ethnicity are important. According to Ratcliffe and McKerna, “African Americans and Hispanics are about twice as likely to have student loan debt as whites,” at 34 percent, 28 percent, and 16 percent, respectively. This discrepancy is “not surprising,” observe the authors, because “white families have six times the wealth of African American and Hispanic families.” Greater wealth allows for “greater opportunity, as adults can use their wealth to finance education for themselves, their children or their grandchildren.” Beyond family income levels, access to education is important. Studies show that “Black parents were … more likely to report child-related educational debt,” in part because Black students have a “greater likelihood of attending schools that offer less financial aid relative to the cost of attendance.”

Why are so many students in debt?

The literature suggests that consulting with guidance counselors and school financial aid advisors can dramatically improve students’ understanding of financial aid and thus their management or avoidance of debt.[1] However, a descriptive case study of 15 schools in five different states (California, Florida, Georgia, Maryland, and Pennsylvania) found that students often receive inaccurate or incomplete information from school guidance counselors.[2] While some emphasize their own burdens with student loans to scare students out of taking them, others choose not to mention them at all. Still others provide information through alumni panels, workshops, and cost comparison sheets, resulting in significant variation in the kinds of information students receive.[3]

Telling students to merely avoid debt rather than telling them how to manage it can affect a student’s decision to go to college.

But it is not just the quantity or quality of information that is important when providing financial assistance to students and families, but the means through which it is provided. In a series of interviews conducted with college counselors in urban high schools, McDonough and Calderone found that many counselors “only provided printed information for distribution to students and/or parents.”[4] Overreliance on such passive resources can foster isolation between advisors and families, as well as confusion regarding payment options and opportunities.

The Effects of Faulty Guidance

Telling students to merely avoid debt rather than telling them how to manage it can affect a student’s decision to go to college. According to Perna, “willingness to borrow varies based on students’ race/ethnicity and financial resources,” resulting in “lower … college enrollment rates for Hispanics and American Indians than for Whites.”[5] Similarly, Burdman discovered that “even academically qualified Hispanic and African American students may not enroll…in part because they compare their short-term earning potential from employment directly after high school to the cost of college, without an understanding of the longer-term economic benefits that can result from attending and completing college.” In sum, fear of acquiring debt and taking out student loans causes some people to avoid going to college at all.

Aversion to debt and, by extension, higher education also manifests itself within post-baccalaureate institutions. Baum and O’Malley found that 42 percent of students who did not go on to graduate school noted that their “concern over borrowing prevented [them] from going to graduate school.” Similarly, Millet found that “students with $15,000 or higher in debt were less likely to apply to graduate or first professional school” while “in contrast, nearly 59 percent of the students without undergraduate debt applied to graduate or first professional school compared to 41 percent who did not.” These findings are significant considering that average student loan is more than $37,000. Although other factors such as GPA, selectivity of college, and sex also influenced the decision to pursue an advanced degree, 41 percent of borrowers deterred their aspirations strictly due to debt in the 1992-93 timespan under study.

…the problem isn’t only that students are acquiring debt, but also that the fear of debt can have adverse consequences for students’ college and career decisions.

Overall, the literature suggests that the information counselors provide students can be inadequate and that it may even deter some students from going to college. However, many of the studies outlined above fail to actually engage students. Thus, we know less about how students’ perception of student debt affects their college and career decisions. Although going to college can level the playing field, those most likely to acquire debt including both millennials and minority students may never make it to the start line. To gain a better understanding of the resources available to students, as well as their interactions with advisors, we spoke directly to students in the Capitol Region during the fall 2019 semester.


We conducted focus groups with students on three college campuses including the University at Albany, Hudson Valley Community College, and Empire State College between November 6th and 18th, 2019. Focus groups consist of a guided discussion on a specific topic with small groups of diverse people. This approach enables the researcher to observe various points of views simultaneously by listening to and learning from participants (see Table 1).[6]

TABLE 1. Focus Groups


We supplemented our findings from the focus groups with more formal interviews. In particular, we spoke to various financial experts, guidance counselors and financial aid officers regarding the biggest obstacles students face when managing or paying their student debt (see Table 2).

TABLE 2. List of Interviews


It’s important to note that the data are not generalizable in that we only looked at three schools and spoke to a handful of experts. However, it does provide key insights about the unique challenges students face. The data also provide insights from diverse students and institutions – Hudson Valley is a two-year community college and Empire State College and the University at Albany are both four-year institutions. Whereas the University at Albany captures the traditional student demographic, having a majority of students entering immediately after high school, Empire State College targets an older demographic, thus capturing a wider range of perspectives.

Overall, the data suggest three factors complicate the dissemination of financial knowledge and advice including the quality of interaction with the counselors, discrimination in the dissemination of financial information, and, lastly, the nature of information being shared.

Quality of Interaction with Counselors

Our conversations with focus group participants suggest that students and parents often felt disconnected from their financial advisors. Consistent with the literature, many felt they were merely presented pamphlets or web links for information they did not understand. According to one focus group participant, college admission counselors “would tell us to go on the financial aid website and look at the information there but most of the information you would not understand what they’re actually saying.”[7]

…others expressed that they felt “confused” and “very uninformed,” even after speaking with guidance counselors or financial aid officers. One participant felt “so uninformed” that her family never even filled out the FAFSA.

Students also expressed disapproval concerning their interactions with high school guidance counselors. For example, some mentioned that in high school they were mandated to meet with counselors only once a year. When asked if they received any financial advice or counseling relating to college loans before college, one focus group participant stated “No. Not at all. Not even not really, just not at all, no information.”[8] Many echoed his sentiments, lamenting how “in high school, no one prepares you. It’s pretty much you … just going to a few websites.”[9]

Students were further disappointed with financial aid officers at the college level. Many indicated that they rarely received notifications or reminders from the financial aid office about scholarship opportunities or other means of decreasing tuition costs. One participant expressed his dissatisfaction with the financial aid office at the college, reflecting on how the office failed to provide information about scholarships that would have subsidized the costs for his semester abroad program.[10] Another participant, an international student, expressed how her financial aid process was “restrictive.” “I don’t know how the loan system here works,” she stated:

I don’t even know how the social system here works … how to take out loans, how to get scholarships and whatnot … You’re never told when the scholarships are put there for you. And, yes, it is tedious but it honestly wouldn’t hurt to send an email to all college students like they do every day saying: Oh hey, the scholarships are up … fill it in if you want. Submit your application if you want … [H]onestly, it wouldn’t hurt. And to me I think that is the biggest reason why I haven’t been able to receive any – just the lack of information and the lack of help that you receive.[11]

Still others expressed that they felt “confused”[12] and “very uninformed,”[13] even after speaking with guidance counselors or financial aid officers. One participant felt “so uninformed” that her family never even filled out the FAFSA.[14]

Ironically, counselors and advisors also felt disconnected from students, claiming that students were overly passive in obtaining information. Thus one of the financial aid counselors we spoke to felt students did not make their finances a “priority.” He continued:

I feel in some ways that it’s not a priority. The priority is getting to class, getting those assignments done, and I’ll figure out how … I’m going to pay my student loans back on the day I graduate kind of thing. Or when I need to register next semester kind of thing. I really think we see a lot of students in reactionary or crisis mode when it’s really not necessary, if they… think things through and just budget and work with us, but sometimes that doesn’t happen.[15]

In sum, while students feel that counselors are not providing information in ways they can understand and use, counselors feel that students fail to actively seek this information, resulting in poor financial choices.

Discrimination in the Dissemination of Financial Aid Information

The disconnect between counselors and students is more potent when talking to minority groups. Several focus groups participants felt that counselors withheld vital information due to discrimination and what one participant referred to as having “favorites.”[16] More specifically, this participant said counselors in her son’s high school “selected people that they tell select information to.”[17] As a result, she didn’t find out about educational programs like Upward Bound until “other people were in it, and then its past the deadline.” Another participant felt that, although counselors had “all the information,” they weren’t “going to open the drawer and give you all the keys” unless you “reach out to them and tell them.” In other words, this young Black male felt he did not receive vital information unless he took initiative and explicitly asked for it.[18]

Studies support these sentiments. Indeed, research suggests that some counselors operate under the assumption that “African American and Latino parents are reluctant to use loans to finance college prices,” and thus refrain from discussing how to manage loans with them.[19] As we discovered in our focus groups, withholding information can hinder one’s opportunities for financial aid and scholarships and, therefore, their ability to pay for college. Discrepant advice sharing can also generate a distrust of financial advisors, making students reluctant to take advantage of the financial information available.

Faulty Information

Lastly, we found that some students acquire significant debt because financial aid advisors offer advice that is purely anecdotal or based on their own experience with loans. One college career counselor we interviewed pointed out that, although loans are inevitable for most people, the school failed to educate students on debt maintenance, focusing instead on debt avoidance and getting students in schools that match their affordability.[20] Although most counselors have good intentions, students inevitably suffer when they lack the necessary education on how to manage debt.

Some counselors agree that their colleagues lack adequate training. When asked how financial advisors receive training, one interviewee stated that “there’s not really a school of financial aid…. the government expects us to know basic tax information, the type of filing, the types of forms, and what they’re used for,” and yet there was no specific training for financial aid in the college sector.[21] Instead, advisors develop expertise based on “hands-on experience in the financial aid office.” Furthermore, this advisor noted, there isn’t a lot of “sensitivity training,” which enables counselors to learn how to communicate. Instead, counselors who are “in it totally to make money” enter schools and campuses with “general knowledge about financial aid” and limited “campus experience.”

Policy Recommendations

When it comes to college loans, our research suggests the problem isn’t only that students are acquiring debt, but also that the fear of debt can have adverse consequences for students’ college and career decisions. At a minimum, both guidance counselors and financial aid officers should cultivate more interpersonal forms of communication. Students need face-to-face counseling. Merely providing weblinks and pamphlets is not an effective means of disseminating information to families. Instead, counselors must sit with students and parents to discuss all relevant options. Verbally explaining information rather than merely handing along written texts can make a substantial difference in families’ ability to understand their financial options. Pamphlets and written texts should be used as supplements to counselor interactions, just as textbooks in school supplement the knowledge disseminated by teachers.

Counselors and advisors must also be required to obtain adequate training that ensures they understand FASFA and other financial aid forums. Counselors using anecdotal information to advise students, or purely telling them not to take out loans, hinders students’ understanding of loans and how to manage them. Although there are several online sources available to counselors, many are passive in nature. For example, the Financial Aid Toolkit provided by Federal Student Aid has a plethora of sources from PowerPoints to pdfs but these sources can be just as confusing to counselors as other online sources are to students. Incorporating financial aid literacy within guidance counselor and financial aid training curriculum can help ensure that schools hire authorized and informed advisors

Finally, awareness campaigns are also critical to educating people about taking out student loans and the resources available to them. The Office of Financial Empowerment (OFE) in New York City’s Department of Consumer Affairs is a great example of how awareness campaigns can help remedy the student loan crisis by making New Yorkers aware of their “financial health,” especially in “low-income and minority communities.”[22] OFE strives to “empower individuals and build awareness so that they understand what they’re getting into.” They hold “student loan debt clinics,” and assist students who already have debt, ensuring they are in the best repayment plans. Emulating these campaigns nationally, as well as educating counselors and advisors, is a necessary first step to solving America’s student debt crisis.

The questions at the heart of this brief are important because they highlight the nature of student debt as a conceptual and social phenomenon, rather than merely a fiscal one. No student who seeks to go to college should be discouraged from doing so because they receive the wrong information or no information at all. Both guidance counselors and financial aid officers have a responsibility to make sure students have the information they need to decide if college is right for them.


Oluwakemi Kemi Kehinde is a senior on the prelaw route at UAlbany, majoring in English honors with a double minor in psychology and philosophy, and a Fall 2019 Center for Law and Policy Solutions intern


[1] Patricia M. McDonough and Shannon Calderone, “The Meaning of Money: Perceptual Differences Between College Counselors and Low-Income Families About College Costs and Financial Aid,” American Behavioral Scientist 49, no. 12 (August 2006): 1709.

[2] Laura W. Perna, “Understanding High School Students’ Willingness to Borrow to Pay College Prices,” Research in Higher Education 49, no. 7 (April 2008): 589-590.

[3] McDonough and Calderone, “The Meaning of Money,” 1709.

[4] McDonough and Calderone, “The Meaning of Money,” 1709.

[5] Perna, “Understanding High School Students’ Willingness,” 593.

[6] David Morgan, “Focus Groups as Qualitative Research,” Qualitative Research Methods Series 16, no. 2 (December 1996): 6-25.

[7] FG_11182019

[8] FG_11062019

[9] FG_11062019

[10] FG_11062019

[11] FG_11062019

[12] FG_11062019

[13] FG_11112019

[14] FG_11112019

[15] Interview #02_11132019

[16] FG_11182019

[17] FG_11182019

[18] FG_11062019

[19] Laura W. Perna, “Toward a More Complete Understanding of the Role of Financial Aid in Promoting College Enrollment: The Importance of Context,” in Higher Education: Handbook of Theory ad Research, Volume 25, ed. Laura W. Perna (Netherlands: Springer, 2010), 129-180.

[20] Interview #02_11132019

[21] Interview #02_11132019

[22] Interview #06_11252019