Twenty years after enrolling in college, the median white student-loan borrower will have paid off 94 percent of the debt he or she accumulated in that period. But the median black borrower for the same period will still owe 95 percent of his or her student-loan debt, according to a new report from the Institute on Assets and Social Policy at Brandeis University.
The report, “Stalling Dreams,” found that the current system of higher-education financing exacerbates inequality, with black students facing the greatest challenges when it comes to funding their education through student loans. Students of color don’t just take on more loans; they also have greater difficulty paying them off, meaning they’re much more likely to experience long-term financial insecurity.
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Twenty years after enrolling in college, the median white student-loan borrower will have paid off 94 percent of the debt he or she accumulated in that period. But the median black borrower for the same period will still owe 95 percent of his or her student-loan debt, according to a new report from the Institute on Assets and Social Policy at Brandeis University.
The report, “Stalling Dreams,” found that the current system of higher-education financing exacerbates inequality, with black students facing the greatest challenges when it comes to funding their education through student loans. Students of color don’t just take on more loans; they also have greater difficulty paying them off, meaning they’re much more likely to experience long-term financial insecurity.
The institute’s study tracked national data on a cohort of students who began college in the 1995-96 academic year. When they started college, 43 percent of white students in the cohort financed their education without student loans, compared with just a quarter of black students.
And among all of the students — not just those who took out loans — the median undergraduate loan amount for black students was 3.5 times as great as what was taken out by their white peers.
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While the typical black borrower took out about $3,000 more than did the average white borrower, the median black borrower would end up owing $17,500 more than did his or her white peers 20 years after starting college, the report said. In that time, the study found, nearly half of white borrowers paid off their debt, while just a quarter of black borrowers were able to do the same.
That particular disparity, researchers say, paints a sharp picture of the racialized impact of the system of higher-education financing.
“While student loans once aimed to improve economic trajectories of young people by expanding opportunity, for many, particularly black students, small debt burdens have been replaced by large debt loads that anchor students in a position of economic jeopardy,” the report’s authors wrote. “Rather than serving as a springboard, the loans serve as an anchor, keeping young black adults in an uncertain economic precarity.”
When it comes to repaying student loans, black students typically have fewer family resources to rely on — a finding researchers note is exacerbated by discrimination in the labor market and more frequent responsibility to support older relatives.
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Regardless of family income, education level, and amount of student loans, the report found that young black adults are expected to have nearly $8,500 less in wealth than will their peers — a gap that creates a “substantial barrier” to paying off student loans and saving for the future. Couple that barrier with the burden of student-loan debt, and the hurdle is one that researchers call “insurmountable” for many young black adults.
The report also cites the “aggressive” marketing tactics for-profit institutions use to recruit increasingly high numbers of black and Latino students. Many of those students leave without finishing their degrees and find themselves saddled with loans that can cost more than public colleges, according to the report.
“Thus, student loans, rather than opening doors, frequently block upward mobility for economically vulnerable students of color for years, leading to ongoing financial constraints and frequently default,” the authors wrote.
Default rates also varied significantly along lines of race and ethnicity. More than a quarter of all student borrowers in the 1995-96 cohort defaulted on their loans within 20 years, according to the report. Twenty percent of white borrowers defaulted. For black borrowers, that number was nearly half, and for Latinos, one-third.
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To deal with the disparity, the authors of the report call for immediate policy actions that cancel “as much student debt as possible” — a proposal that is already on the table for 2020 presidential candidates like Sen. Bernie Sanders and Sen. Elizabeth A. Warren.
“We need a return to strong public investment in higher education that acknowledges the societal benefit of an educated public,” the authors wrote. “With student-debt cancelation on the policy agenda for the 2020 presidential race, this is a crucial moment in which significant progress could be made to reverse the damage of our disinvestments in higher education.”