Black Students Face Significant Student Loan Debt

• Black college students are more likely to take out loans and face barriers to repayment.
• Black students have less generational wealth and experience pay inequities after graduation.
• Loan forgiveness programs for Black students are key to improving the student debt crisis.

Students and their families often take out student loans to help pay for college. With the rising cost of tuition at U.S. colleges and universities, many students are taking out more — and larger — loans to cover the exorbitant expense of a college education.

President Joe Biden has frequently discussed the crippling loan debt impacting our country's college students. While his administration remains a strong advocate for eliminating student debt, Biden has not enacted any policy or issued an executive order for student loan forgiveness. The president also recently elected to exclude loan cancellation from his annual budget.

Graduating with immense loan debt can have severe consequences on a student's ability to generate wealth, own a home, raise a family, and create economic freedom. With many students opting to go to college for increased job and social mobility, graduating with piles of student loan debt may make college less attractive for some.

The Black Student Debt Crisis

Student loan debt — now the second-largest type of debt after mortgages — exceeds even credit card debt. Currently, about 42 million Americans have student loans, making student debt relief an important issue among voters, especially young adults. For Black college students especially, the weight of student loan debt can significantly hinder their social and economic mobility.

Research shows 86.6% of Black college students take out federal loans to attend four-year colleges, compared to just 59.9% of white students. A Black graduate from a four-year college has, on average, $7,400 more in student debt. Black students are also more likely to default on their loans than their white peers.

For Black students in particular, student loan debt relief would improve their future social and economic life outcomes, as well as alleviating the stress that comes with managing massive amounts of loan debt after graduation.

Although financial literacy on appropriate borrowing amounts can be taught, improving Black college students' awareness of the issue alone will not solve the problem. Increased opportunities for repayment and loan forgiveness plans are necessary.

To understand why student loan debt impacts Black students more harshly, it is imperative to examine the role systemic racism has played in placing Black Americans at a disadvantage and making them less likely to amass wealth, build assets, and secure higher-paying jobs.

Financial Hurdles for Black College Students

Many factors put Black students at risk of default. There are also systemic obstacles that significantly impede these students from paying off their college debt. Below are some of the most prominent hurdles impacting Black students currently.

Less Generational Wealth

For decades, there's been a substantial gap in net worth between white and Black households. In 2019, the median white household held $188,200 in wealth — 7.8 times that of the typical Black household.

Decades of racist housing policies and labor inequalities obstructed Black families from accumulating such wealth as home equity, investments, and savings. Federal housing policies resulted in segregationist practices that designated Black neighborhoods the riskiest — and white communities the safest — for mortgage lending.

Black families were also forced to turn to predatory lenders to finance their homes, which often led to monumental debt or even foreclosure. These practices created huge economic disparities between Black and white families.

Access to wealth enables families to pass or transfer this wealth intergenerationally. White households are substantially more likely to receive inheritances than Black households. As such, Black families have fewer resources on hand to pay for college, increasing the need to take out student loans.

More Likely to Attend For-Profit Colleges

For-profit colleges and universities are often an attractive option for students of color, especially first-generation and low-income students. These schools offer the promise of low-barrier enrollment and faster degree completion. Nevertheless, they have long been controversial due to their high costs and poor academic results.

What's more, for-profit schools that are not accredited do not offer students federal loans or grants, forcing many students to resort to private loans with high interest rates. Black students are more likely to attend for-profit schools, where almost half of these students default within 12 years of starting college.

More Likely to Be the First in Their Family to Attend College

According to the U.S. Department of Education, 1 in 7 Black college students is the first in their family to attend college. First-generation students and their families are often unfamiliar with the true costs of college and the details of financial aid.

If a student lacks an understanding of the hidden financial costs associated with a college education, such as housing, meal plans, books, campus fees, and technology expenses, they cannot accurately determine whether they have the financial resources to afford it.

Additionally, many first-generation students and their families are unfamiliar with scholarship and grant opportunities, i.e., financing options that don't require repayment. Lacking this knowledge may lead them to take out more loans than needed or run up unnecessary credit card debt.

They Experience Pay Disadvantages After Graduation

It's commonly assumed that completing a degree increases your earning potential. But even with the same level of education, Black workers are paid less than white workers. They're also less likely to be promoted, which can be attributed to bias and discriminatory practices in the workplace.

Achieving lower earnings after finishing college creates disadvantages for repaying debt, especially for private loans. Black students may also be unaware of income-driven repayment plans for federal loans that can ease the financial burden of heavy student loan debt.

Recently, Black students have become more likely to enroll in graduate programs than they were previously, possibly due to the challenges they face with securing high-paying jobs. Although an advanced degree may open the doors to greater job prospects for Black students, earning such a degree increases one's student loan debt since there are no federal grants for graduate-level education.

Student Loan Forgiveness Needed to Build Black Wealth

If student loan debt continues to cripple Black students and their families, social and economic inequalities will persist. Student loan debt prevents Black students from building wealth and forces them to delay homeownership, retirement savings, and raising a family. Moreover, when students are saddled with loan debt, they're unable to contribute to and revitalize the economy.

Black students have been stymied by systemic discrimination. In addition to increased literacy around repayment plans and borrowing strategies, Black students need institutional change. A targeted forgiveness plan for Black students is critical to ensuring they can lead an economically sustainable life after completing college.