A new report from the Community Service Society of New York highlights the disconnect between student loan borrowers and the repayment system, identifying widespread confusion, a lack of financial literacy, and deep mistrust that continue to fuel delinquency and default among millions of Americans.
Student loan debt plays an outsized role in the financial lives of consumers with past-due accounts, and for many operations in the credit and collection industry, these findings help explain why borrowers are harder to reach, harder to convert, and more likely to be financially overextended. CSS’s report, When Engagement Feels Futile, offers data-driven insights into why engagement breaks down and what strategies could pull borrowers back into active repayment.
CSS and its partners surveyed borrowers nationwide, drawing on EDCAP casework, a focus group, and message testing with more than 74,000 adults. Their findings show a consistent pattern: borrowers are overwhelmed, under-informed, and financially stretched. Nearly one quarter of adults who left college reported taking no steps at all to address their loans, a number that jumps to 57% among recent graduates. Many borrowers hold off on repayment because they expect future forgiveness, even though most forgiveness programs still require active participation and consistent payment histories.
Awareness gaps are also significant. Nearly half of borrowers do not know about income-driven repayment, Public Service Loan Forgiveness, IDR forgiveness, or disability discharge. Everyday financial strain compounds the issue: 73% of borrowers say high living costs are their biggest barrier, and 64% prioritize food, housing, and medical needs over loan repayment. For the collections industry, this aligns with what many agencies and creditors are seeing: student loans may not be a top-of-wallet debt even when consumers want to do the right thing.
CSS identifies a trust crisis at the center of the repayment problem. Borrowers frequently cite misinformation, servicing failures, billing errors, and inconsistent communication as reasons they disengage. That disengagement is reinforced by confusion — 59% say repayment is overwhelming — and by a belief among many that they will simply “never pay off their balance.”
The report also tested messaging strategies and found that the most effective outreach starts with clear consequences, such as credit damage or wage garnishment, then pivots to hopeful pathways, including affordable IDR payments or forgiveness. Borrowers also overwhelmingly want personalized help: nearly 90% said they would use free one-on-one counseling if it were available.
CSS outlines several remedies:
• Targeted, behaviorally informed campaigns that emphasize both risks and relief.
• Clear, consistent communication delivered through the sources borrowers trust most — government, servicers, schools, and nonprofits.
• Automation of IDR enrollment and recertification to reduce servicing failures and cognitive overload.
• Financial literacy built into high school and college curricula to prevent future confusion.
• Expanded nonprofit counseling capacity to address borrower fatigue and misinformation.
