Paying back student loans simply shouldn’t be so complicated — for anyone. But people with less than a bachelor’s degree who have student loan debt have been particularly failed by the system. Not only did they not receive the ROI higher education is supposed to provide in the way of higher salary, more job prospects, and better opportunities for advancement, they also face mountains of debt that must be repaid out of their tighter budgets. 

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According to new data from a joint report by WGU Labs and Savi, fielded by Gallup, borrowers without a bachelor’s degree — those who have either an associate’s degree or some credit for a bachelor's but did not complete their degree — have faced the most serious consequences of the student loan system. Data from the report, titled “Left Adrift,” shows that these borrowers were less informed about their repayment options and less likely to have engaged with their servicer — who is supposed to help them get into the best repayment plan. They also make substantially less money than borrowers with a bachelor's, and face the greatest pain to their budgets from loan costs as a result. Additionally, borrowers without a bachelor’s degree are much more likely to have their loans in default.

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All borrowers, but especially those falling through the cracks in the system, should be aware of the best repayment options for their circumstances. The knowledge gap revealed by this data indicates that the standardized approach to student loan repayment isn’t working. Borrowers need more personalized information and support, or they’ll be stuck paying more than they need to and miss out on important financial milestones such as home ownership and saving for retirement. 

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Many borrowers are leaving money on the table

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It sounds simple: Borrowers need to know all their loan repayment options to decide which one is the best for their circumstances. But the “Left Adrift” survey found that while almost 90% of borrowers indicated that they know at least one of their repayment options, only about 28% are aware of all of their options. More concerning is that over 15% of borrowers with less than a bachelor’s degree reported not knowing any of their repayment options, compared to only 9% of borrowers with a bachelor's or higher.

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Determining the best loan repayment option is a complicated calculation based on income, loan balances, expected future earnings, household size, and more. The standard repayment method — a fixed monthly payment set such that the borrower will repay the loan in 10 years — is certainly not the best option for all borrowers. Borrowers who have very large loans and modest incomes, for example, would be much better off with an income-driven repayment (IDR) plan that allows their loans to be forgiven in 10 or 20 years, depending on their job sector.

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Given the number of borrowers who are unaware of all their options, there could be millions who chose the “wrong” repayment plan for their circumstances. Steering borrowers into the standard plan at the beginning of their loan repayment journey has long-term consequences, causing many to put off saving for retirement, getting married, buying a house, pursuing additional education, or having children. In fact, a recent Hechinger Report article chronicled the growing number of senior citizens who expect to die with college loan debt. 

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Borrowers without bachelor’s degrees are most impacted

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While choosing the “wrong” repayment plan has financial repercussions for all borrowers, it hurts borrowers without a bachelor’s degree the most. Borrowers without a bachelor's make 42% less in median weekly earnings than those with a bachelor’s degree. That means even if their payments are lower, each payment will cut more deeply into their budgets. This may partly be why borrowers without a bachelor's degree were almost three times more likely to report being in default than borrowers with a bachelor's.

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The impact of being in default is immense: it can damage credit scores, make it challenging to pursue additional education, and result in wage and tax return garnishment. However, 25% of surveyed borrowers without a bachelor's find themselves in this situation, despite their ability to enter into an IDR plan and make extremely low payments — an option they may be unaware of. 

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All this data paints an alarming picture: Borrowers without bachelor’s degrees make less money than those with bachelor’s degrees, yet many end up paying more for their postsecondary education because of a system that guides them into choosing financially detrimental loan repayment plans. 

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The one-size-fits all approach isn’t working

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It’s easy to cast blame on the borrowers and chastise individuals for not doing their homework when selecting a loan repayment plan. But considering the millions of people struggling with student loan debt, it’s clear the current system isn’t working for most people. Since the survey found 72% of student loan borrowers aren’t aware of all of their repayment options, and there are currently as many as 40 million student loan borrowers in the U.S., that means there could be 28 million borrowers out there that would benefit from more financial information. 

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These findings should be a wake-up call for loan services, universities, employers, and anyone else who is invested in the financial well-being of America’s borrowers to make sure information is clear and widely available. We can’t have a one-size-fits-all approach to student loan repayment — we need to target extra support to those who need it the most.

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Want to see more data? Download the full report here.