The Lasting Challenges of Student Loan Debt for Hispanics and Latinos in Philadelphia
By Nathaly Suquinagua
Latinos and Hispanics were more likely to be first-generation college students than any other racial ethnic group in 2019. While that has slowly changed over the years, many students are still struggling with college debts after graduation and are pursued by bank collectors for monthly payments.
Like many graduating students going into the real world, Hispanics and Latinos are facing challenges in the job market. But Latino students take out more student loans to pay for their educations than their white peers, and that can cause issues, such as wage gaps and imbalances of economic status.
“Borrowers in majority-Black and majority-Latino neighborhoods shoulder greater debt burdens and struggle when repaying their loans,” according to the Protect Borrowers report. In fact, 14% of students from high-income families had jobs in STEM, business and health care compared to just 6% of low-income students.
According to the Student Borrower Protection Center, “Black and Latinx students are more likely to take on student debt. 90% of Black and 72% Latinx students take out loans to attend college in comparison to 66% of white students. While the underrepresented group takes on more debt, the study found that the 90% (group) is five times more likely to fall behind.”
As interest payments pile up each year, many graduating students need guidance on what to do when falling behind and tackling the debt that seems to never truly go away.
Specifically, in Philadelphia, the average rate of student loan delinquency was 26% in majority minority neighborhoods, while the majority white neighborhoods was 11%, according to the Student Borrower Protection Center.
What can be done?
It has been difficult for young people who are first-generation, trying to plan their futures, said Mayra E. Soto, membership engagement manager at the Greater Philadelphia Hispanic Chamber of Commerce. Many are also battling to keep their family members from being removed from the United States because of their immigration status.
With that being said, Soto explained in Spanish how students who do manage to graduate from college are often left with tremendous debt that can lead to economic burdens that affect the future of the family.
“On the positive side, they are very prepared. They have a much more advanced entrepreneurial mindset than their parents did when they were starting businesses,” Soto said.
Soto said today’s young adults have a clear idea of what they want, and with their university education, they’re more prepared to start at a higher level than their parents did. She explained that the Hispanic Chamber of Commerce works to help young adults become entrepreneurs and to understand how business is done in the state of Pennsylvania, specifically in Philadelphia.
The organization also partners with universities that offer basic courses on how an idea can turn into a business.
“Something we’ve tried to identify is that, financially, it’s hard for us Latinos to prepare for retirement, to prepare to save. So having these kinds of programs prepares us to be successful, but also to have a successful retirement,” Soto said.
The Hispanic Chamber of Commerce is not only for Latinos; it can be helpful to anyone who wants guidance about their business. Soto said education is critical in preparing a person to succeed in business and to build savings.
While graduating Latinx students have earned a college degree, they often leave school with debts that can exceed $25,000, according to a new study done by UCLA. “The median Latinx borrower carries more than 80% of their original loan balance 12 years after graduation,” the study says.
Some Latinx participants in the study said they have postponed major life decisions, such as having children and beginning to save for retirement.
The UCLA study focused on 41 students who graduated from college in 2018.
“Of the 41 research participants, 26 graduated with $51,000 to more than $100,000 in debt,” the study reported. Furthermore, among the 41, “responses regarding student loan debt tended to reflect despair and shame, according to the research.”
“Saving money is something that is really difficult, but since they are young, if they have that financial mindset from a young age, they are going to move forward with more success than someone who never had that mindset,” Soto said. Guidance really matters, she said about saving: “It’s never too late; it’s just really important to use these resources to guide you.”
At Finanta Credit Union, Iris Santiago, branch manager of the Philadelphia credit union, said young Latino adults face challenges with financial education and credit unions.
“Up to around 30% of Gen Zs don’t know how they can join a credit union at all,” Santiago said. “The gap can be even wider in Latin communities, where financial systems may already feel unfamiliar.”
While in college, many students start off with high-interest credit cards, which can lead to debt at an early age. Santiago said credit cards can be seen as predatory on campuses, and without financial education, the result can be debt.
“Credit building itself isn’t always clear, especially for first-generation households in the U.S. credit system,” Santiago said. “It can be confusing and definitely hard to navigate. You know that definitely adds up quickly between credit cards and student loans, especially as a young adult in college.”
One of the biggest needs that Finanta’s Philadelphia credit union sees is access to clear, trustworthy guidance that can help people navigate the burden of loans and debts.
Still, Latinos with a bachelor’s degree working full-time year-round have the lowest earning among racial and ethnic groups, according to the U.S Bureau of Labor Statistics. While those hardships can take a toll on Latinos, the current repayment system can be yet another factor deepening the strain on these young adults.
According to “Growing Student Debt Impacts Latinos’ Financial Futures,” a column from Unidoo US, a policy and advocacy group, a high proportion of Latinos have their loans serviced by Navient, a company that has run into problems with the U.S. Department of Education. Because of those issues, the company stopped servicing most federal student loans in 2021, and reached a settlement with the Consumer Financial Protection Bureau in 2024 that banned Navient from servicing federal student loans.
Santiago said Finanta’s Philadelphia credit union often sets up information tables at community events, aiming to raise awareness and provide financial education in neighborhoods around Philadelphia. That effort includes bilingual workshops on budgeting, saving, credit, and preparing to take out bigger loans, such as home ownership.
“The start is simple,” Santiago said. “Just focus on a few habits that you can keep, like paying on time, staying on track of your spendings, and definitely being mindful and careful with your credit cards. Many have interest rates over 20%, so even a small balance can grow quickly.”
Just having a point of contact with someone, either at a bank or a credit union, can play a crucial role in making good early decisions as a young adult might.
Organizations such as the Student Borrower Protection Center have worked with economists and researchers at regional banks to publish reports examining the performance and prevalence of student debt in city neighborhoods such as Philadelphia’s. They have pointed out how student debt acutely affects communities of color and exposed stark racial disparities in student loan borrower distress.
While student loan debt is a lasting challenge that many young adults can face well into later adulthood, access to guidance and support can ease the stress of repayment. That is especially true for people in minority communities, who often face greater barriers and debt burdens. Finding the right guidance can make a meaningful difference in how their financial futures develop over time.