Are Student Loans a Scam? More than 60% of Borrowers Think So

While debate continues to rage over the Aug. 24 announcement to cancel some student loan debt, the consensus is clear that Americans have been struggling to cover day-to-day expenses due to student loan payments.

In fact, almost half of student loan borrowers have used a payday loan or other high-interest short-term loan to make one or more student loan payments, and more than 60% believe that student loans overall are a scam, according to a new survey.

Table of contents:

  1. Key takeaways
  2. Other findings
  3. The bottom line
  4. Methodology
  5. Tips on how to tackle student loan debt
  6. From the experts

42% of student loan borrowers have used a payday loan

More than 42% of student loan borrowers have had to turn to a payday loan or title loan in order to either cover routine monthly bills.

This is a troubling statistic since many payday lenders charge interest above 400% APR and are considered to be so predatory that they’re illegal in several states. The average payday loan has $520 in fees for an initial loan of $375, and 80% of initial loans are rolled over into new loans when the borrower can’t make the payment. More than 90% of payday loan borrowers end up regretting their original loan.

Sofia Perez, owner of, is one of many Americans who was forced to turn to payday lenders in order to juggle monthly expenses and student loan minimum monthly payments.

She is optimistic that the upcoming cancellation of $10,000 in student loan debt for borrowers who earn less than $125,000 per year, or $20,000 for borrowers who initially qualified for Pell Grants, will help her escape the predatory lending cycle.

“I hope that this will help me to get back on track and finally start making progress on my debt,” Perez said.

Perez isn’t the only person who has been struggling to make their payments.

“I took out a loan during the first year of my graduation, and believe me … I’m still working incredibly hard to get rid of it even after eight years of graduation,” said Chloe Daniel, an online tutor with

When Daniel faced a catastrophic life event three years ago, she lost everything, including her job and savings. She found a new job and is working on getting her life on track, but it has been a struggle.

“The worst part is that my loan is 100 times bigger than my income, and it will take centuries for me to pay it back,” she said. Daniel applied for debt forgiveness from her bank, but her application was rejected.

Meanwhile, “the interest keeps on elevating like it has nothing else to do,” she said. “Sometimes I feel like this burden will stay on my shoulders till the end of my life.”

This has been a common refrain by many who are grappling with student loan debt during a time of economic uncertainty, as inflation skyrockets, people go hungry and gas prices fluctuate.

To learn the extent of the struggle, surveyed more than 1,000 Americans to learn their student loan status and their payment situations. Here’s what we learned:

Key takeaways

Many think student loans are a scam: 63% of student loan borrowers think the loans are a scam, with about 25% saying they’re worse than payday loans.

They can’t afford the payments: More than 65% of borrowers have used some form of questionable loan product to get by, with 30% using a payday loan, 12% using a title loan, 7% using a high-interest installment loan, 8% turning to a cash advance app like Dave and 8% using a Buy Now Pay Later plan to pay for an item they otherwise would not be able to afford.

They lead to regret: About 60% of survey respondents regret their student loans, with 18% saying they wish they’d never pursued higher education at all, 14% saying they feel overwhelmed with debt and 10% left wishing they’d chosen a less-expensive school. Another 9% regret their loans because they never earned a degree, and 8% regret choosing to attend graduate school.

Other findings

Paying on credit: 56% have used student loans to pay off credit card debt, but only 32% say the credit card debt was school-related.

Many borrowers are pessimistic: Roughly 21% say they feel like there is little to no chance that they will ever be able to repay their student loans in full.

Student loan payments cut deeply into budgets: 29% say they haven’t been able to save for emergencies, 14% have to live with family or take on a roommate, 10% can’t afford their monthly bills and more than 5% don’t have enough money left after their monthly student loan payment to cover day-to-day expenses. More than 7% say their student loan payments have prevented them from being able to save for a home.

Borrowers don’t understand APRs and how interest adds up: Just over 12% of student loan borrowers can correctly guess the amount of interest they’ll pay on a $10,000 student loan with a 7% APR that’s paid off over 10 years (a payment of roughly $116 per month). The correct answer is $3,932.94 total.

They’re mostly satisfied with the decision: 69% agree or strongly agree with the $10,000 cancellation total, while 13% disagree and 17.5% remain uncertain. About 43% say the total was just right, while 34% say it was not enough and 23% say it was too much. And it’s not just borrowers who’ve already paid off their loans who believe the $10,000 total is too high. Of that group, 11% owe more than $200,000, 9% owe between $150,000 and $200,000, 11% owe between $150,000 and $200,000 and 10% owe between $50,000 and $100,000. About 6% of that group don’t know how much they owe.

Of those surveyed who earn more than $125,000 and thus do not qualify for the cancellation, 70% still agreed with the decision, while 17% are uncertain. A total of 12% of that group disagrees or strongly disagrees.

Paying them off is a big job: 6% of borrowers have been paying their loans off for more than 20 years, while another 9% have been paying for more than 15 years, 19% for more than 10 years and 21% for more than 5 years. Roughly 5% are currently in default and 2% have had them discharged either through a federal program or bankruptcy.

A long road ahead: Almost 5% of borrowers do not know how much they still owe. Another 5% owe more than $200,000, 7% owe between $150,000 and $200,000, 10% owe between $100,000 and $150,000 and 14% owe between $50,000 to $100,000.

Student loans fund more than just four-year college: While 49% said they used their loans to attend a four-year public university and 35% used loans to attend a private four-year university, more than 12% used them to pay for technical or trade school, 13% to pay for a remote for-profit university and 11% paid for community college classes. About 25% said they also have loans from post-graduate studies, including law and medical schools.

The bottom line

Higher education is expensive, and students may not fully understand the total cost of the student loans they’re being offered. While this $10,000 discharge will help Americans struggling to juggle their loan payments and day-to-day living expenses, the higher-education system needs longer-term reform to help cap tuition and room and board costs and lower the interest rates students are asked to pay.

Students who don’t have the savings necessary to make it through college without loans should pursue scholarships and grant opportunities before turning to loans, and consider work-study programs or even side hustles like rideshare driving or food delivery to help offset some expenses. Completing some coursework at community colleges may not completely eliminate the need for loans, but can be considerable savings for those who can live at home and work a part-time job. In the long run, it may be worth taking part-time classes for a year or two in order to build some savings to put toward tuition.


DebtHammer collected survey responses from a random sample of more than 1,000 adults between the ages of 18 to 65 from Aug. 26 to 29 via Survey Monkey and DebtHammer’s subscriber list from September 8-14. Each response was anonymized using a unique user ID. All qualifying participants either currently have a student loan or have had a student loan in the past.

Of those we surveyed, 59% were female and 41% were male. Reported income ranged from less than $15,000 a year to more than $200,000. The racial breakdown is as follows:

Tips on how to tackle student loan debt

Willita Cherie, founder of Build Young Grow Wealthy, explains how she tackled her student loan debt.

Cherie said she paid down her undergraduate student loans:

  • Using autopay to save on interest.
  • Making multiple payments a month to pay down the principal.
  • She took advantage of deferments, forbearance, and income-driven repayment plans.
  • Because Cherie worked as an educator for six years, the final half of her student loans were forgiven through the teacher student loan forgiveness program.
  • Cherie said she paid over $20K before she graduated from grad school by:
  • Making monthly payments while enrolled as a student so that she avoided paying any interest, which helped her to become debt free before graduation.

From the experts

Patricia Roberts

Author of Route 529: A Parent’s Guide to Saving for College and Career Training with 529 Plans and Chief Operating Officer at Gift of College

Despite having worked multiple jobs during my undergraduate years to contribute as much as I could toward my education without excessive borrowing and despite working full time while attending graduate school at night, I wound up with over $50,000 in student loan debt and still owed the majority of it when my son was born. While I had no idea how we would be able to do it, I was absolutely determined to give my son a less financially stressful academic experience than his father and I had. We owed over $100,000 in student loans between us. We made a commitment to consistently save a little at a time in a 529 college savings plan while we chipped away at our student loan debt and addressed other priorities. Having funds withdrawn directly from my paycheck and sent to the 529 account I established for my son made all the difference. I am happy to report that after 18+ years of saving and with some sensible decisions made about which school to attend based on net cost and other factors, he has recently graduated debt-free from college.

Beverly Gearreald

Community manager at college and career prep company Transizion

Student loans are a great way to get a higher education if you can turn around and capitalize on that education to get a higher-paying job. However, if you’re not certain that college is the right path for you, then taking out student loans can leave you with a lot of debt and no additional income to pay it off. While I never had to get a payday loan, it was a significant financial burden to get a degree and then not end up working in that field.

The recent student loan forgiveness has left me torn. I’m genuinely delighted for the people it helps. But as a person who had significant loans and sacrificed to pay them off, I feel cheated. Last, I’m also frustrated because forgiving student loans doesn’t solve any of the systemic problems that got us to where we are right now. It’s removing a bucket of water from the vast ocean of debt without damming any of the rivers feeding the ocean.

Dennis Shirshikov

Strategist at real estate investing site

Student loan forgiveness is essentially a stimulus package that doesn’t trigger inflation. Rather than giving people money, the government just reduced their monthly expenses, allowing them to borrow more.

Personally my wife and I will have $40,000 in student loans forgiven all together. This has resulted in us being able to make larger purchases on credit and we are considering paying down our credit cards more quickly now.

While payments were in moratorium the bill essentially took our previous $750 / month payment and turned it into a $250 a month payment, since I still have about $20,000 outstanding.

Erik Kroll

Certified Financial Planner and owner of Student Loans Over 50.

Are student loans worthwhile in general? I think you first need to question whether going to college is worthwhile. I think paying out the ear for college is definitely not a great idea, so anything you can do to limit the cost of college (working part-time in school, going to community college for the first couple years, etc) is a great idea. But you have to fund college somehow. Federal student loans are typically the best way to do that if you don’t have the cash laying around.

Scroll to Top