The multi-trillion dollar debt tsunami our economy is not prepared for

Throughout the world, education is seen as the gateway to upward mobility. For generations, parents have told their children that if they stay in school, study hard and earn a university degree, they’ll have a better shot at a brighter future.

But for too many, that promise is collapsing under the weight of debt. Across advanced economies, the cost of education has ballooned, far outpacing wage growth. Financial aid systems haven’t kept up. And for millions, the decision to pursue higher education is no longer a pathway to prosperity; it’s a financial burden with consequences not only for individual borrowers but also for entire economies.

In the United States alone, borrowers owe approximately $1.8 trillion. And after years of policy fluctuation and pandemic-era pauses, that burden is about to grow heavier. In 2025 alone, up to 9 million borrowers will have defaulted loans sent to collections.

This is a looming economic shockwave and I’m surprised that more people aren’t sounding the alarm about it.

This crisis is not confined to the United States. In many countries, student loan debt is expanding in both size and severity.

Second to the US, which has the most student debt of any country, is the United Kingdom where student debt has surpassed £200 billion, and repayment plans are growing more complex. In Australia, “indexation” adjustments are triggering dramatic loan increases, pushing some borrowers deeper into long-term debt despite steady repayments.

Meanwhile, across emerging economies, rising tuition and limited public funding are leading more students to borrow from private lenders with high interest rates and little recourse.

All combined, around the world we’re seeing young people being asked to mortgage their futures to invest in education, without a systemic safety net to support them if that investment doesn’t pay off.

Student debt doesn’t just weigh on individuals in the present; it delays and, in some cases, destroys their financial future.

Borrowers are far less likely to save for retirement. Many postpone homeownership, delay having children or struggle to build credit. These aren’t small side effects, they’re milestones of economic stability that, when missed, erode long-term security and compound across generations.

And the impact isn’t evenly distributed. In the US, women hold nearly two-thirds of all student loan debt and earn less on average. And first-generation university students often borrow more without the safety net of family wealth to fall back on.

We are watching a system supposedly designed to increase economic opportunity that is instead deepening inequality.

An urgent factor that cannot be ignored is the rapid acceleration of artificial intelligence.

As AI reshapes the job market, knowledge workers are facing unprecedented shifts in employability and income. Those with access to upskilling opportunities, career transitions and digital literacy training are adapting, while those burdened by debt, financial strain, or complex repayment systems risk being left even further behind.

AI also threatens to accelerate the divide when it is used solely to reduce operational costs, such as automating collections, without providing support to improve borrower outcomes.

But AI can and must be part of the solution. When thoughtfully deployed, AI can streamline overly complex loan servicing systems, offer personalized repayment guidance, reduce friction in accessing loan forgiveness programmes and provide counsel on financial planning to balance the demands of debt with the critical need to save for the future.

Technology, when paired with empathy, communication and policy alignment, can become an equalizer.

Solving the student debt crisis will require a multi-pronged approach. There is no single fix, but several levers are within reach:

In the US, the Cares Act enables employers to make tax-free contributions towards employee loan repayment, while the Secure Act 2.0 allows employers to match student loan payments with tax-advantaged retirement plan contributions. These benefits need to become standard practice, not rare exceptions.

Education financing shouldn’t be considered in isolation. It’s time to recognize student debt as one element in a larger picture that includes housing, healthcare, childcare and retirement. We must stop asking individuals to choose between investing in their future and surviving their present.

It should be used to simplify, support and solve, not just to monitor and collect. This means designing algorithms that centre on borrower well-being and aligning innovation with financial inclusion.

At its core, this debt crisis is about who gets access to upward mobility and who doesn’t.

We have a chance, right now, to ensure that financial wellness is not a privilege reserved for the wealthy, but a fundamental right available to all. However, that requires action from employers, regulators, technologists and society as a whole.

We cannot wait for this debt tsunami to hit. We must build better systems now.