Why the Student Debt Crisis Hits Black Borrowers Harder

"In the student debt crisis, black borrowers take the hardest hit," NerdWallet reports.

"They borrow at a higher rate than any other group: 87% of black students borrowed federal loans compared with 65% of Latino students and 60% of white students, according to an analysis of government data by the Center for American Progress, a public policy think tank.

And they are more likely to default on their loans than other groups, which can deliver a long-lasting blow to credit scores. Nearly half of all black students who enrolled in 2003-2004 defaulted on at least one loan over the next 12 years, compared with 1 in 5 white students over the same time period, according to an analysis by Robert Kelchen, assistant professor of higher education at Seton Hall University.

Default on federal loans occurs after nine months of missed payments. Borrowers can be sued or pursued by debt collectors; the government can garnish their paychecks; and they lose the chance to lower or suspend payments, options still available to those who haven’t defaulted.

But higher debt doesn’t tell the whole story of why black student borrowers default. Experts say that while there are social and economic challenges that put black borrowers at a higher chance of default, there are also strategies students can use to help lower that risk.

They have less generational wealth. Social and labor inequalities have led to less accumulated wealth — home equity, investments and savings — among black families compared with white families, according to the Economic Policy Institute. In 2013, white families in an EPI survey had a median wealth of $134,230 compared with a median $11,030 among black families. That means black students have fewer out-of-pocket resources to pay for college, which leads to more borrowing.

They may be the first in their family to go to college. According to the U.S. Department of Education, 1 in 7 black students is the first in their family to go to college. Parents of first-generation students may not have the savings, planning experience or familiarity with financial aid levers that families with a long college tradition do."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.


Publication Date: 2/9/2018

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