Student loan debt is a struggle felt by many graduates in America, and with rising tuition costs, more and more people are feeling the financial strain of a college education. However, this debt is not felt in the same way by each borrower.
Due to systemic factors such as the racial wage gap, borrowers of color are most likely to face financial consequences stemming from their student debt. Here’s a breakdown of average US student loan balances by race and the disparities that exist between demographics.
Statistics: Student Loan Debt by Race
- Black students take out the most student loans for a bachelor’s degree, followed by white students, Hispanic students, and Asian students.
- Four years after graduation, black students carry nearly twice as much student debt as their white peers, largely due to differences in interest accumulation and college loans.
- After graduating from college, 20% of black students and 23% of Hispanic students are behind on their student loans, compared to 6% of white students.
- Among female undergraduate borrowers, the average black woman has the most student debt, averaging $41,466.05 one year after graduation.
What is the breakdown of student loan debt by race?
|Race/ethnicity||Average Total Student Loan Debt|
Source: Federal Reserve
Racial Disparities in Student Debt
In an April 2022 Bankrate survey, borrowers of color — especially Hispanic borrowers — were the most likely to report needing to delay a financial decision, like buying a home or saving for emergencies, because of their student debt. . Unfortunately, this is only a small piece of the puzzle when it comes to the impacts students of color face with their student loan debt. The same survey found that only 28% of black borrowers who graduated with student loan debt say college significantly opened up career and income opportunities, compared to 37% of white borrowers and 41% of borrowers. hispanics.
According to a Brookings Institution study, black students experienced the largest cumulative percentage change in median student debt and one of the smallest percentage changes in median income from 2009 to 2019, compared to white, Asian students. and Latinos. The Institute for College Access and Success (TICAS) also found that in 2016, black borrowers graduated with higher borrowing rates and higher student debt than white, Latino, and Asian graduates.
Repayment of groceries and student loans
The disproportionate effect of student debt on marginalized communities can strain monthly budgets after graduation. TICAS estimates that the average debt for bachelor’s degree holders with loans in 2016 was $34,000 for black borrowers, $30,100 for white borrowers, and $25,450 for Asian and Hispanic borrowers. Assuming the standard 10-year loan repayment plan and an interest rate of 4.29% for the 2015-2016 school year, here’s how those monthly payments break down:
- Black borrowers: $348.94.
- White borrowers: $308.91.
- Asian and Hispanic borrowers: $261.19.
This monthly payment gap can be even greater for borrowers with private student loans, who often charge much higher interest rates.
Higher loan amounts could be a factor affecting default and delinquency rates. TICAS research shows that 12% of white students fail to repay their student loans within 12 years, while nearly 38% of black student loans will default within the same time frame. The Institute on Assets and Social Policy adds that within 20 years of starting college, the typical white borrower will see almost 95% of their balance paid off; the typical black borrower will still owe 95% of their principal balance in the same amount of time.
The bottom line
Student loan debt in America disproportionately impacts borrowers of color. Almost every aspect of the loan process – from origination to repayment – impacts racial groups differently, with non-white borrowers enduring longer repayment terms and higher loan principal amounts.
Borrowers who are struggling to repay their federal student loans can take advantage of federal benefits to lower their monthly payments, temporarily defer payments, or seek other repayment options. Those with private loans do not have uniform relief options like federal loans; however, borrowers can ask their lender about hardship and payment assistance options.