Black Student Loan Borrowers: College Debt Is Lifetime Sentence That Widens Racial Wealth Gap
(WASHINGTON) – A new research brief from The Education Trust shows that the student debt crisis places an especially heavy burden on Black Americans with student loans.
Jim Crow Debt: How Black Borrowers Experience Student Loans is based on nearly 1,300 surveys and 100 in-depth interviews with Black student loan borrowers who took out loans to attend college or graduate school. They shared with researchers what it feels like to carry the weight of student loans, sometimes long after leaving campus.
Four key themes emerged from the surveys and interviews with these Black student loan borrowers:
1. Black borrowers: Student loans are not “good debt.”
Only a third of borrowers in the study said student loans improve life opportunities. Two-thirds of participants regret having taken out student loans to pay for higher education. Borrowers in the study characterized their loans as “shackles on their ankle,” and “like Jim Crow.”
2. Black borrowers: Income-driven repayment plans are a lifetime debt sentence.
These Black borrowers made it clear that income-driven repayment plans — which cap monthly student loan payments as a share of income — are not a sufficient response to the student debt crisis. For example, 8 in 10 borrowers in the study who are enrolled in income-driven repayment plans say their student loans are a primary source of financial stress. One study participant who repeatedly tried and failed to qualify for Public Service Loan Forgiveness after working in nonprofit organizations for 27 years told researchers: “I am 62 years old, and I do not know how I will retire.”
3. Black borrowers: Limiting student debt cancellation would harm Black borrowers the most.
The study’s findings challenge the idea that canceling student loans only for borrowers below certain income levels or loan amounts is an equity-focused way to provide student debt relief. More than half of Black borrowers in the study earning over $100,000 per year postponed purchasing a home because of their loans; more than half put off saving for retirement. Black borrowers in the study felt as though they were being “punished” for pursuing higher levels of education expected of them in a racially discriminatory job market: 95% of borrowers in the study felt that to be hired their credentials had to be higher than those of their non-Black counterparts. Given the racial wealth gap, more education often means more debt for Black students.
4. Black borrowers: The federal government should cancel all student debt.
Four out of five borrowers surveyed support government forgiveness of all federal student debt. Some favor canceling debt for Black borrowers. For example, one participant suggested the federal government cancel student debt as a form of “reparations” and “to [redress] racism and wealth inequality.”
The Education Trust advocates for an approach to federal student debt forgiveness that takes wealth into account and that seeks to remedy the consequences of the diminished value of the Pell Grant in recent decades. In 1980, the Pell Grant covered about 80% of the full cost of a four-year college degree for students from low-income families. Today, it covers less than a third of the cost. Ed Trust is lifting the voices of Black borrowers – who have been disproportionately harmed by higher education policy failures – and demanding meaningful action in response.
“We’re calling on Congress and the Department of Education to listen to the experiences of Black borrowers and provide substantial debt relief that can narrow the racial wealth gap,” said Denise Forte, interim CEO of The Education Trust. “In addition to canceling debt for current borrowers, Congress should at least double the Pell Grant and make meaningful progress toward debt-free college, so no American — Black or otherwise — has to go through what these borrowers are going through.”
While the repayment pause for federal student loans expires early next year, there is no sign of the student debt relief the Biden-Harris administration has supported and prominent members of Congress have pushed for.
“This new report adds to the growing evidence that our broken student loan system is keeping Black borrowers stuck in a cycle of debt,” said Sen. Elizabeth Warren (D-Mass.). “Canceling student debt is the single most effective executive action President Biden can take to address the racial wealth gap for borrowers and provide them with the relief they deserve.”
“This new report makes plain what Black and brown borrowers have known for years — that student debt has become a lifelong financial trap that pushes students of color down the economic ladder, rather than up. That must change,” said Rep. Ayanna Pressley (D-Mass.). “President Biden must use his executive authority to cancel student debt so we can begin to finally reduce the racial wealth gap and jumpstart our economy, and we must make equity-driven investments in higher education that prioritize students of color and students from low-income backgrounds. This is good economic policy that would change the lives of millions of families, particularly Black and brown borrowers who are disproportionately impacted by this crisis.”
Jim Crow Debt is the first report from the Ed Trust’s National Study on Black Student Loan Debt, which was made possible with support from the TIAA Institute and a national advisory board. National leaders in philanthropy, consumer protection, and student voice have joined the call to listen to Black borrowers and enact equity-focused higher education policy.
“There are deep racial disparities in the return on investment in higher education, as these Black borrowers make crystal clear,” said Stephanie Banchero, director of the Education & Economic Mobility Program at The Joyce Foundation. “It’s past time for policymakers to make economic mobility, racial equity, and income-based gaps in college outcomes a top priority in the Great Lakes region and across the country.”
“This new report from Ed Trust conveys what Black students and borrowers are feeling: Too often, student debt is a lifelong financial trap that continuously prevents us from creating generational wealth; it is not a tool for moving up the economic ladder,” said Kristin McGuire, executive director of Young Invincibles, a nonprofit organization with a mission of amplifying the voices of young adults in the political process and expanding economic opportunity for this generation. “It’s past time for federal and state policymakers to listen to college students and borrowers, enact broad-based debt cancellation, and make equity-driven investments in higher education that prioritize Black, Indigenous, and Latinx students, and students from low-income backgrounds, as we’ve called for in Texas and elsewhere.”
“This national study is a must-read for advocates working to improve the student loan system,” said Julia Barnard, a researcher at the Center for Responsible Lending. “We join Ed Trust in urging Congress and the U.S. Department of Education to listen to our nation’s Black borrowers and provide across-the-board student debt cancellation. Once again, the data has shown the disproportionate impact of student debt, and the report powerfully illustrates how higher education policy failures have impacted the lives of Black borrowers. It’s past time to level the playing field.”
The full research brief is available at https://edtrust.org/black-student-debt-study.