ALTERNATIVES TO US STUDENT LOANS THAT PARENTS AND STUDENTS ARE TAKING AND PERCEPTIONS SURROUNDING STUDENT LOANS IN THE US

ALTERNATIVES TO US STUDENT LOANS THAT PARENTS AND STUDENTS ARE TAKING AND PERCEPTIONS SURROUNDING STUDENT LOANS IN THE US

This report provides an overview of insights into the perceptions surrounding student loans in the United States as well as alternatives that students or their parents are considering. Student loans have a challenging image to offset due to an association with overwhelming debt to those who fall behind or can’t make large enough minimum payments. Women, minorities, and first-generation college students are particularly vulnerable to falling behind on their student loans while simultaneously carrying additional stress as a result of COVID-19. Student loans are viewed as a “major concern” across political party lines.


For alternatives, students are increasingly turning to cheaper options such as community college and public schools. Others are logging in online to edX to take free online college courses. A significant percentage of students are taking a gap year, in part due to COVID-19 health concerns as well as the financial impact of the virus limiting their ability to pay (and their willingness to take loans). Some are opting to enter the workforce directly with a trade career or workforce training.

1. Free Online Alternatives are Becoming Popular

  • Students are turning to free online courses from reputable organizations to acquire marketable skills.
  • Among the schools that offer free online courses is Harvard, which offers HarvardX through edX. A “huge list” of Harvard and are available at no charge.
  • Additional free online courses from top-tier schools are available at Coursera.
  • Free online courses don’t tend to impart certificates or degrees (without additional costs), however, making them a limited option depending on the field the student is interested in.

2. Going Directly Into Workforce Careers or Jobforce Training

  • Some students are opting to bypass college and go directly into trades such as construction or manufacturing.
  • Businesses in the trades tend to provide on-site training or they may fund additional training opportunities at no cost to the worker.
  • Job force training options enable students to learn professional skills including EMT training before going directly into the field.
  • Students have the potential to make upwards of $70,000 or more with no college degree a short time after starting their trade career.

3. Students are Embracing Cheaper Alternatives for College

  • A significant percentage of students have shifted their chosen school as a result of COVID-19 and the impact on their ability to pay for school.
  • With 41 percent of students now anticipating that they will need to take on more student loans, cheaper options are being considered to lower the overall amount of debt students graduate with.
  • Whereas 28 percent of students were planning to attend a community college before the pandemic, 36 percent are now.
  • 15 percent of students are now planning to attend a public college rather than a private one to save on costs.

4. Students are Taking a Gap Year

  • Taking a gap year is becoming increasingly popular for students who were previously considering enrolling in college.
  • Health concerns surrounding COVID-19 is a leading reason prompting students to take a gap year. One in five students surveyed in April 2020 weren’t sure if they’d be attending school due to COVID-19.
  • COVID-19 has increased financial strain and potential debt for students, making the need to take a gap year to save money a larger factor.
  • 27 percent of students are taking a gap year just to get back on track financially.
  • The Gap Year Association website has had a 150 percent increase in traffic site wide, with some pages get a 300 percent increase.

Off-Track Borrowers Discouraged by Growing Balances

  • For student loan borrowers who have gotten behind with their payments for any reason, seeing their student loan balance grow can be psychologically overwhelming and cause even more delayed payments.
  • The potential for growing balances to be overwhelming is true even if the borrower has been in a deferment program or has paused making payments at their own request.
  • The most tension for student loan borrowers comes from those who are making reduced or income-based payments but are still seeing the balance grow due to interest.
  • This creates a feeling of hopelessness that permeates into other areas of the former student’s financial life.
  • “Many said their monthly payments were out of reach and there was nothing they could do,” reads the associated Pew report.

COVID-19 is Increasing the Perception that Student Loan Borrowers will Fall Behind

student loan borrowing by race

  • This chart indicates borrowing by gender:

borrowing by gender

  • Women, minorities and first-generation college students are more likely to obtain less well-paid jobs, have more additional debt, and have higher levels of stress that impacts their overall well-being. In other words, prior to COVID-19, these groups were already more vulnerable to defaulting or feeling overwhelmed due to student loans.
  • COVID-19 has caused disproportionate job loss in the industries that women, minorities and first-generation college students find work in. This means that these groups are already adversely affected and prospective students who are either female, a minority, or a first generation student will have dramatically reduced job opportunities.

Students Carrying Loans View Their Degrees as Less Valuable

  • Students who have a student loan balance are less likely to see their degrees as valuable than those who do not carry a balance, according to a 2018 survey.
  • 36 percent of students (ages 25-39 with at least a Bachelor’s degree) who are carrying debt say that the costs of their degree were either “much larger” or “somewhat larger” than the financial benefits they received from it.
  • By contrast, for students who are not carrying debt, only 15 percent felt that the costs were greater than the benefits.

Student Debt is a Concern Regardless of Political Party

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