Study: Racial Disparities in Student Loan Debt Worsen Over Time

By Allie Bidwell, Communications Staff

Research has shown that student loan borrowers’ experiences with student debt can look very different depending on a number of factors. But new research from the Brookings Institution shows the disparity is particularly acute for black college graduates, as racial disparities in student debt balloon in the years after graduation.

The new study, written by Judith Scott-Clayton and Jing Li, found that the black-white disparity in student loan debt more than triples in the four years after graduation. Upon completing their programs, the study said, black college graduates owe just $7,400 more on average than their white peers – $23,400 compared with $16,000. But four years later, that gap more than triples to about $25,000. The sharp increase in the gap is largely attributed to increased enrollment in graduate school – particularly at for-profit institutions – among black college graduates.

“While previous work has documented racial disparities in student borrowing, delinquencies, and defaults, in this report we provide new evidence that racial gaps in total debt are far larger than even recent reports have recognized, far larger now than in the past, and correlated with troubling trends in the economy and in the for-profit sector,” the study said.

The study is based on data from two editions – 1993 and 2008 – of the Department of Education’s (ED) Baccalaureate and Beyond surveys, which follow cohorts of students for four years. The study also draws on additional data from ED and the census Bureau. The study comes forward with a number of new findings on racial disparities related to student debt, but also calls for more comprehensive tracking of data on financial aid and student debt broken out by race.

The key findings of the study include:

  • Racial disparities are larger than previously understood, and have grown substantially over time. Four years after graduating, the black-white gap for the 2008 cohort was nearly $25,000. In the 1993 cohort, the gap was less than $2,000.
  • Black student loan borrowers remain more than three times as likely to default on their loans within four years.
  • Nearly half of the black-white gap comes from differences in borrowing for graduate school. The differences are driven by higher rates of enrollment in graduate school and higher rates of borrowing.
  • Graduate school enrollment increased significantly for black students between the 1993 and 2008 cohorts, almost exclusively in the for-profit sector.

In order to truly understand the extent of racial disparities in student debt, as well as their causes and consequences, there needs to be more comprehensive and more frequent data tracking, the study said. Additionally, research and policy should not limit their focus to undergraduate borrowing, considering the substantial role graduate school borrowing appears to play.

Finally, the authors argued that while new student loan repayment options, such as the Revised Pay As You Earn (REPAYE) plan, can help alleviate consequences of racial debt disparities, they do not address the root causes.

“While income-contingent repayment can help reduce the worst consequences of the racial debt gap, it treats the symptoms without acknowledging or remedying the underlying causes of the disparity,” the study said. “Federal financial aid policy alone cannot solve these problems—but neither can it ignore the challenges facing students of color who disproportionately bear the burden of student debt.”


Publication Date: 10/24/2016

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