Although high outstanding student loan debt has been a problem for years, it wasn’t until relatively recently that the idea of simply annulling that debt began to garner mainstream support. Searches for “student loan forgiveness” and “student loan cancellation” have spiked since the beginning of 2021, and it’s easy to understand why. Americans collectively owe $1.7 trillion in student loan debt, an amount larger than the gross domestic product (GDP) of nearly every country on Earth.

It’s a huge financial burden that is only going to continue to grow. It places substantial pressure on an already economically vulnerable populace (i.e., young people just getting started with their careers and their families, particularly those from lower-income backgrounds). Looking at student loan debt by race, it becomes apparent that while this issue affects almost everyone in the United States to some extent, some groups are having a harder time than others.

Student loan debt affects more than 44 million Americans, and costly repayments can make it difficult to save money for long-term goals, such as buying a house or saving for retirement.
By looking at the percent changes in median income and student debt since 2009, Brookings found that there is an ever-widening gap between what people are earning and what they owe for their education. That said, the difference has actually been diminishing over time for Asian borrowers, whereas the gap remains substantially wider for Black students.
Intergenerational wealth transfers exacerbate the racial wealth gap for all students of color, but especially Black borrowers. According to the Student Borrower Protection Center, Black students had less household wealth and took on more loans to finance their education in 2020, which limited their opportunities to generate wealth.
According to Brookings, although there were quantifiable family income and wealth differences between Black borrowers and White students in 2018, these only accounted for roughly half of the default rate gap between these two groups. Even when you control for differences in degree attainment, college GPA, and post-college income and employment, this gap remains.
Among populations, Black, Hispanic, and Native American borrowers generally had higher unmet financial needs, incurred more student loan debt, and were more likely to struggle financially to stay in school in 2020.

Student loan debt is the end result of taking out money to pay for an education, including the cost of any tuition not covered by scholarships, textbooks, living expenses, and other associated expenses. The escalating price of higher education has made it extremely difficult to afford without some form of financial assistance.

In the not-unlikely event that a student cannot find a sufficiently high-paying job after graduation, they will obviously have difficulty paying back their loans. Delinquency is the consequence of missing a repayment due date by even by one day. After a certain period of delinquency, depending on the type of loan, there is a risk of going into default. Each of these conditions can have a substantial impact on a person’s financial circumstances, particularly when it comes to their credit score and credit report.

Student loan debt affects more than 44 million Americans, and costly repayments can make it arduous to save money for long-term goals. What’s more, this burden doesn’t affect all Americans equally. People of certain racial or ethnic groups are more likely to have larger student loan debt balances on average.

These discrepancies can be caused (or at least influenced) by racism. And while student loan differences can be both a symptom of greater socioeconomic inequities and a reinforcement of them, other factors also can influence how much debt a group will collectively owe:

Total U.S. Population: The size of a population group can skew the results of certain statistics. For instance, if a study find that one group takes out student loans more than any others, it may simply be because there are more people in that group.
Differences in Income: It’s obvious, but still worth mentioning, that those with higher incomes after graduating will have an easier time paying down their debt. The Bureau of Labor Statistics (BLS) releases a quarterly report that shows a wage gap by race does indeed exist.
Career Distribution: Similarly, if more members of a particular group have careers in high-paying industries, such as STEM fields, they will be able to more easily repay their student loans. The inverse is also true; groups with a disproportionately large presence in low-wage positions, such as food service, will be slower to fully repay their debt or and have more trouble meeting minimum required payments.
Credit & Lending Issues: Having good credit is necessary to secure a private student loan, especially at a favorable interest rate. Additionally, if more members of particular groups are targets of predatory lending, this can make paying back student loans even more difficult.
Familial Wealth: Affluent families may choose to finance the entirety of their child’s education, leaving them debt-free upon graduation. Conversely, those who are struggling may have to rely on their children for financial support, which puts additional economic strain on anyone already struggling to repay student loans.
Parental Obligations: Young parents, particularly single ones, are naturally going to have to factor in childcare into their budget. Depending on their income, they may be unable to afford to this new expense, basic necessities, and to pay down their debt.
Local Cost of Living: The affordability of basic necessities, such as housing, can vary substantially between different parts of the U.S. Groups that are concentrated in institutions within areas that have a higher cost of living will of course need to borrow more money to afford their living expenses.
Type of Institution: The cost of attendance at an institution can vary based on whether it’s public or private, for-profit or nonprofit, and whether it has two-year or four-year programs. This results in differences in the cost of tuition, fees, room and board, books, and other academic supplies.
Loan Type: There are two basic types of student loans: federal loans funded by the U.S. government and private loans provided by banks and other nonfederal lenders. Multiple factors can determine how difficult each one is to repay. For example, private loans are generally more expensive than their federal counterparts and may have higher interest rates.
Graduation Status: If a student takes out a loan for college and then doesn’t graduate for any reason, they’re stuck with a significant debt without the economic benefits that come with a degree. Additionally, those seeking a postgraduate education will need to take out additional money on top of the debt accumulated for undergrad.

Before we share our findings how student loan debt differs by race, there’s one more issue to discuss: Much of the available research on the differences in student loan debt by race compares Black and White borrowers only. There is less information that includes the full range of racial groups within the U.S. Certain datasets covering one or more group(s) don’t include others. Or the information on the wider range of groups may originate from a different (and sometimes less recent) source.

Note that the names of certain groups used below may not be entirely consistent throughout the article in order to match the terminology used by our sources. For example, although Investopedia prefers the identifier Latinx, this article uses categories such as “Hispanic” to provide an accurate representation of how the study we quote reported the information.

According to the Board of Governors of the Federal Reserve System, at $44.88 thousand on average, Black borrowers took out the largest amount of federal student loan money in 2019. Although “Other” was technically the second highest, at $40.40 thousand, it’s unclear from the Fed’s website which groups compose this category, which limits its effectiveness in comparisons. White borrowers accounted for the second-largest amount for a single group. Finally, Hispanic borrowers took out the smallest amount on average, at $30.89 thousand.

Of note: When the Fed began recording this data in 1989, Black borrowers had the smallest amount of student loan money. They overtook all other categories (excluding “Other”) after 2010, barring a dip in 2013.

A sobering statistic: The U.S. Department of Education found that, within a four-year period following graduation, 48% of Black students have experienced their debts rising to amounts that are larger than what they originally borrowed, compared to just 17% of White graduates.

Looking at the intersection of race and gender, the general trends are relatively similar to what the Fed reported. Here’s what the American Association of University Women (AAUW) found:

Black men and women both had the largest average student loan debt in 2017, with Black women having the highest overall debt at $37,558.
Next were White borrowers, with White women similarly holding more student loan debt than their male peers.
Although Hispanic/Latinx borrowers were the third highest, this time it was the men of this group who owed more than their female counterparts, albeit by $423.
Asian borrowers owed the lowest amounts, with men also owing slightly more than women.

Additional discrepancies can be seen in how loans are distributed, depending on both race and where the student studied. This is what the Student Borrower Protection Center reported, which can also be seen in the above chart:

Black/African American graduates across all types of institutions were the highest percentage of borrowers to finance a higher education in 2020.
Asian borrowers had the lowest percentages across all categories, meaning they were the most likely to graduate without any student loan debt.
White borrowers had the second-highest percentage in public two-year universities, the third highest in both public four-year and private nonprofit two-year universities, and the fourth highest in private nonprofit four-year universities.
Percentages for both Hispanic/Latinx and American Indian/Alaska Native graduates were generally on the higher side, excluding public two-year institutions.

It’s also worth noting that, across all five groups, the percentages of borrowers for private nonprofit two-year universities were both the highest and had the least amount of difference among the groups. A possible explanation for this is that private nonprofit two-year universities have a higher cost of attendance, as the Urban institute found in 2017-2018.

It’s no secret that high student loan debt is a major problem for most borrowers, regardless of their background. By looking at the percent changes in median income and student debt since 2009, Brookings found that there is an ever-widening gap between what people are earning and what they owe for their education. That said, the difference has actually been diminishing over time for Asian borrowers. Conversely, the gap remains substantially wider for Black borrowers, and the amount of debt that these students are taking out only serves to reinforce the racial wealth gap between White and Black workers.

Black borrowers. Intergenerational wealth transfers exacerbate this issue for all students of color, but especially for Black borrowers. According to the Student Borrower Protection Center, Black students had less household wealth and took on more loans to finance their education in 2020 than other groups, which limited their opportunities to generate wealth.

Additionally, a 2017 report from the Federal Reserve Bank of St. Louis found that postgraduate White households generally receive financial support from their family, whereas their Black counterparts instead contribute portions of their income to help their family. As a result, when these borrowers have their children of their own who eventually enroll in college, the cycle often begins anew. Also, because Black households generally carry larger amounts of student loan debt, their creditworthiness is more likely to suffer as a result.

Latinx borrowers. This population also faces financial difficulties as a result of their student loan debt. According to UnidosUS, thanks to educational costs rising and grant amounts shrinking, Latinx students and their families frequently chose to pay out-of-pocket and/or take out student loans to finance their education in 2019. Despite attending college with lower incomes and less intergenerational wealth than their White counterparts, Latinx borrowers on average paid more to attend college than White borrowers.

Further worsening the student debt crisis for borrowers of color are private student loans. When the federal aid available to a prospective borrower isn’t enough to fund their education, some turn to private student loans to make up the difference.

Private loans lack many of the safeguards that federal student loans offer, which can protect a student from going into default due to economic hardship. As a result, private borrowers have fewer options should they fall behind on their payments.

What’s more, most federal loans don’t require a credit check and have a set interest rate. Private loans generally do, and interest rates are based on the credit ratings of the borrowers and may require a cosigner. The racial wealth gap can result in student loans costing more, as borrowers with less-good credit ratings may be charged higher interest rates.

According to the Student Borrower Protection Center, students of color (specifically Black and Latinx students) and low-income borrowers used private loans less often than White borrowers, but were more likely to have trouble paying down their debt. Black students, in particular, were four times as likely to have trouble repaying private debt compared to White students, even though the latter are twice as likely to use this form of lending.

Two possible contributing factors:

Private loans require a credit check and interest rates are based on the credit ratings of the borrowers and may require a cosigner. (Most federal loans have no credit check and the same interest rate for all borrowers.) The racial wealth gap can result in student loans costing more, as borrowers with less-good credit ratings may be charged higher interest rates.
In addition, private student loans are more often taken out by students attending for-profit institutions. A number of these institutions, including Corinthian Colleges and ITT Technical Institute, have been accused of fraud related to student loans. Many of these loans take the form of “shadow” debt, which is a largely unregulated market that often features high interest rates, misleading marketing, and risky underwriting. Since Black borrowers are overrepresented in for-profit institutions, they are also the most likely to fall victim to this form of predatory debt.

Perhaps the greatest impact of discrepancies in student lending is how they affect each group’s ability to repay their debt. In 2019, the Center for American Progress broke down the differences in student loan default rates by race and institution type from two years prior.

Loan-default rates were lowest for borrowers who attended public four-year universities, followed by private nonprofit four-year, public two-year, and private for-profit institutions. White students had the lowest rates across all categories. Hispanic or Latinx borrowers had figures similar to their White counterparts, with the largest difference between the two groups being 7% for “All Institutions.” Black students had the highest default rates, with the largest being 42% for private for-profits.

As discussed previously, being unable to repay loans will cause them to lapse into delinquency and, eventually, default. The potentially devastating financial consequences of these states, then, disproportionately fall on Black communities, and difficulties in paying down debt cannot be attributed to income inequality alone. According to Brookings, although there were quantifiable family income and wealth differences between Black borrowers and White students in 2018, these only accounted for roughly half of the default rate gap between these two groups. Even when you further control for differences in degree attainment, college GPA, and post-college income and employment, this gap remains.

The author posited that differences in loan counseling or servicing may have been the cause of the remaining gap. In 2016, the Consumer Financial Protection Bureau (CFPB) found approximately 11,700 complaints from borrowers regarding both federal and private loans, with the most common issues pertaining to income-driven repayment plans, payment processing, and borrower communications. However, although the CFPB reported that students of color may face additional challenges with current servicing and collection practices, it didn’t provide any concrete data to support this. Ultimately, differences in repayment rates are likely the result of all of the factors discussed throughout this piece, which can themselves be the result of systematic discrimination and/or mundane factors.

Although there’s no doubt that the student debt crisis disproportionately affects borrowers of color in a variety of ways, it’s difficult to determine the full scope of its effects. As mentioned previously, due to much existing research focusing on Black and White borrowers, there is less information about how other racial and ethnic groups are affected. For instance, while the Lumina Foundation was able to determine that Black, Hispanic, and Native American borrowers generally had higher unmet financial needs, incurred more student loan debt, and were more likely to struggle financially to stay in school in 2020, it didn’t specify whether this was also the case for Asian borrowers and Native Hawaiian/Pacific Islander borrowers.

In fact, Asian Americans are often excluded from these datasets, as is evident in the Fed’s findings on average student debt amounts and the Center for American Progress’ research on default rates by race. At least with the former we can assume that the “Other” category includes Asian borrowers, but it’s unclear whether that’s also true for the latter’s “All Borrows” grouping, as that could be just the three groups included in the chart. And although Brookings found that Asian borrowers were the least likely to default on their student loans between 2007-2008, this may not still be the case.

Although the Center for American Progress’ data didn’t provide specific figures for Native American borrowers, a 2020 report from the Washington Center for Equitable Growth found that due to high rates of default among this group, several tribal colleges and universities no longer accept student loan money.

Given the hefty financial burden that education debt places on most Americans, particularly students of color, it’s little surprise that there has been such a push recently for a cancellation of student debt. The ACLU, for instance, has called upon the Biden administration to forgive at least $50,000 per borrower.

The question of whether to forgive student debt isn’t a simple one and doing so won’t be a silver bullet solution to all the discriminatory issues plaguing higher education. However, the assumption that hard work and a college degree are all that’s needed to be financially successful is both insulting and ignores the systemic racism that’s made this debt crisis worse.


Leave a Reply

Your email address will not be published.