Student-Loan Debt Is a Crisis for Black Borrowers

In November 2015, The New York Times published an op-ed on student-loan debt that focused on the plight of Liz Kelley, a college graduate, mother of four, and high-school teacher who owed a whopping $410,000 in federal student loans. In 2017, USA Today profiled Melissa Cefalu and her husband, Andrew, two white-collar professionals saddled with $365,000 in debt. One year later, the newspaper profiled Jodi Meyers, whose $60,000 in student debt kept her dreams of homeownership on hold. The Chicago Sun-Times highlighted Tiela Halpin, who said she “expects to die” before repaying her $80,000 debt, as well as Amanda Spizzirri, a four-year-college graduate with $90,000 in debt who is struggling to repay her loans while working as a barista and a server.

Such stories, while powerful, newsworthy, and indicative of real economic pain, are outliers. They misrepresent the burden of debt and its implications for both current and former college students in this country. Student-loan experts would be quick to point out the various ways that these cherry-picked examples of young people are not representative of, or indicative of, a student-loan debt crisis.

First, they would note that these large student-debt figures are not representative of the average borrower — very few students have debt burdens this high. In 2018, 56 percent of borrowers held less than $20,000, 35 percent held less than $10,000, while 33 percent of the outstanding federal education-loan debt was held by the 6 percent of borrowers owing more than $100,000. They would also note that those who do have six-figure debt loads have little difficulty paying it off. We know, for example, that people with $100,000 or more in student debt tend to be doctors, lawyers, and other professionals who accumulated debt in graduate school, but their lucrative occupations make it relatively easy for them to pay down that debt. In fact, those who default on their loans are far more likely to have relatively small amounts of debt — think $1,000 or $2,000 — than large amounts of debt. They might also note that all the people mentioned above are four-year-college graduates (or more), who tend to struggle less with debt than those who do not complete college.

But what policy wonks and scholars might fail to recognize is that the young adults profiled in those newspapers are all white Americans.

Jen, a Black woman profiled by BuzzFeed News, has a story that more accurately reflects the empirical and racial reality of student-loan debt in the United States. Jen has $50,000 in debt and is now on an income-based repayment plan after struggling to repay her loans. Jen’s $50,000 in outstanding student-loan debt is higher than the national average, but research shows that Black borrowers are more deeply indebted than their white counterparts. In addition to accumulating more debt, Jen, like many other Black borrowers, struggled to repay her debt and defaulted on her student loans.

Racial disparities in student-loan default are, to be frank, enormous. College graduates who are Black are more than five times as likely to default on their loans in the decade following graduation as their white peers. Judith Scott-Clayton, an economist and financial-aid expert, calls these high default rates a “crisis” among Black students. That is correct. These stark racial disparities in student-loan-debt accumulation and repayment make it clear that race and racial inequality are central to understanding student-loan debt in the United States. Any discussion of student debt that fails to consider race is missing a crucial piece of the puzzle.

The racialization of student debt did not happen overnight. In the 1980s and ’90s, Black families were about as likely to have student debt as white families. In 2001, 15 percent of Black households held student-loan debt, compared with around 10 percent of white households. By 2013, this disparity had tripled, with 32 percent of Black households holding student debt and only 18 percent of white households reporting student debt. These racial disparities in student debt are substantially larger than racial disparities in credit-card, mortgage, and automobile debt.

In the aggregate, these growing disparities reflect increasing access to college among Black Americans. Black postsecondary enrollment has increased markedly over the past several decades; it makes sense that the racial debt gap may be increasing in the aggregate if more Black people are attending college and thus needing to borrow.

But growing college attendance is not the only reason for this shift. If we zoom in on what is happening only among those who go to college, we also find evidence for a growing racial debt gap. In our analysis of two longitudinal datasets that follow two generations of people, who hit their mid-20s in the mid-1980s and the mid-2000s, we find clear generational differences in student debt among college-goers. In the 1980s, 16 percent of Black college-goers reported having any student debt, compared with 18 percent of white college-going young adults. A negligible difference. Fast-forward to the mid-2000s, and 44 percent of white college-going young adults reported having student-loan debt, compared with 52 percent of Black young adults.

These growing disparities cannot be understood without also recognizing structural racism. At the historical moment when people of color were finally gaining access to college, public support for higher education declined, raising costs and shortchanging these new students. How this happened is a question of scholarly debate. Some argue that states could no longer support colleges and universities as the number of students grew; it is much easier for a tax base to fund colleges if the student body is relatively small. Others argue that the intentions were more insidious: A long line of research shows that the (white) public and policy makers are less likely to support public spending on social goods like higher education and welfare if it may benefit “others” who are seen as unworthy, especially people of color.

Perhaps the most famous example here is Ronald Reagan’s cuts in higher education. As governor of California in the 1960s, Reagan spearheaded funding cuts to the University of California system and helped create the tuition-based system that we know today. Many scholars argue that Reagan’s cuts were at least partially in response to student unrest and protest centered around the Vietnam War and the civil-rights movement. In public speeches and private correspondence, Reagan condemned the largely nonwhite protesters as “filthy” and “trash,” and claimed that instituting tuition would make students value their education instead of protest.

Whether these cuts were intentionally or unintentionally made in response to a growing nonwhite student body, the consequences are the same: College became harder to afford, and racial disparities in debt emerged. The sociologists Louise Seamster and Raphaël Charron-Chénier call this large and growing debt gap an example of “predatory inclusion.” That is, over the past several decades, Black youth have gained greater access to postsecondary institutions, but they have made these gains on exploitative or unequal terms — terms that thrust Black youth deep into the red relative to whites.

Racial disparities in debt have been climbing for decades and are now at an all-time high. Scott-Clayton and Jing Li find that among students who graduated with a four-year degree in 2008 — at the height of a recession — Black borrowers left school with around $7,400 more in debt than whites. Other scholars have found that Black-white disparities in debt are present among those who attend community colleges, for-profit colleges, public schools, and private schools. That these racial disparities in debt are detectable among graduates, dropouts, and two-year and four-year college attendees suggests that racial disparities in debt cannot be reduced to a story of college completion or college choice. What happens in college is part of the story, but not all of the story. Something else is going on.

When we began researching this issue around a decade ago, we wanted to understand these shocking numbers: Why are Black students going deeper into debt than white students? What are the consequences? In our earliest research on this question, we analyzed data from the Bureau of Labor Statistics’ National Longitudinal Study of Youth, 1997 Cohort (known as NLSY97) — an ongoing, nationally representative, longitudinal data-collection effort that follows a cohort of young adults from around their teens through their mid-30s. Unlike more specialized data that follow only college graduates, these data allowed us to track a range of college-goers from a variety of social backgrounds — including those who left college without a degree. We found that, by age 25, Black college-going young adults reported nearly double the amount of debt of their white counterparts. Put in dollar values, if the average white debtor owed $22,000, we would expect a comparable Black young adult to owe $43,516.

Black youth not only take on more debt than their white counterparts. They also have more difficulty paying it off.

Scholars and policy makers rely on aggregated default rates to understand the most extreme repayment problems. Racial disparities in student-loan default — usually the best available measure of debt repayment that we have — are stark, and they have gotten worse over time. Scott-Clayton finds that among students who began at a four-year college in 1996, 7.4 percent of white people defaulted on their loans, compared with 23.4 percent of Black people — a threefold difference. Among those who began college in 2004, 12.4 percent of white people defaulted on their debt 12 years later, compared with 37.5 percent of Black people. In other words, racial disparities in default have existed since at least the 1990s — long before the massive rise in student debt — and over the course of the past decade, default rates among Black college-goers have increased by over 60 percent. While those who do not graduate from college have the highest risk of default, even among college graduates we see stark racial disparities: Over 20 percent of Black graduates defaulted on their loans within 12 years, compared with only 4 percent of white graduates. The investment in a four-year-college degree appears to be paying off for white borrowers, but not for Black borrowers.

In their review of the literature, the higher-education researcher Jacob Gross and colleagues bring up two important points regarding the size and scope of racial disparities in student-loan default. First, race is a stronger predictor of default than almost any other factor, and race explains almost as much variation in default rates (20 percent) as degree completion (26 percent). Second, racial disparities in debt cannot be reduced to the types of colleges that Black and white students attend. Racial disparities in default persist even after adjusting for the type of college people attend and are present at almost every type of institution — two-year, four-year, public, and private. In other words, telling students they should make different choices about where they go to college will not solve this problem.

The data on racial disparities in default rates show a repayment crisis among Black borrowers. But default rates don’t tell the whole story. Most borrowers — and most Black borrowers — do not default on their student loans, but that doesn’t mean they can easily repay their debts. Recent estimates show that less than half (47 percent) of borrowers in repayment have paid at least one dollar toward their principal five years into repayment, even though only a small minority of these borrowers will ever enter default. This means that the majority of young adults are carrying debt well into their postcollege years that they are unable to pay down, or are accumulating debt through interest and fees.

Our quantitative research suggests that these repayment struggles vary dramatically by race. Using data from the NLSY97, we tracked trajectories of debt accumulation and repayment beginning when individuals enrolled in college, until (in some cases) around 15 years after they left college. What we found was astounding: On college exit, Black college-goers reported 85 percent more debt than their white counterparts, and this disparity more than doubled in the decade after they left college. Put differently, Black young adults have more debt a decade after they leave college than white people do when they leave college and before they start repaying their debts.

Among scholars and policy makers, there are differing opinions on whether student-loan debt constitutes a crisis. Depending on your evidence, the case could be made for an accumulation crisis, a repayment crisis, a college-completion crisis, or no crisis at all. All of these positions hold some kernel of truth. Our question, then, is for whom do we see evidence of a crisis?

Our answer is that student loans are a crisis of Black borrowers. To the extent that student-loan debt does all the things that we fear it does — that it holds back a talented generation of young people socially and economically, that it creates a drag on the economy, that it makes college less effective at promoting upward mobility — it does so in a way that reproduces and exacerbates the stark racial divides in this country.

This essay is adapted from the authors’ forthcoming book, A Dream Defaulted: The Student Loan Crisis Among Black Borrowers (Harvard Education Press).