The Final Call

Student debt disrupts chances, widens racial wealth

What's your opinion on this article?

Twenty years after starting college, the median debt of White students who took out loans has been reduced by 94 percent—with almost half holding no student debt—compared to Black student loan borrowers at the median who still owe 95 percent of their cumulative borrowing total.

The report, Stalling Dreams: How Student Debt is Disrupting Life Chances and Widening the Racial Wealth Gap by the Institute on Assets and Social Policy at Heller School for Social Policy and Management at Brandeis University, explains the growing racial wealth gap.

“Black borrowers are much more likely to experience long-term financial insecurity due to student loans,” explained the institute’s director Thomas Shapiro. “The current higher education financing regime exacerbates inequality, and student loans adversely affect the Black-White racial wealth gap.”

In an environment where average college tuition amounts to 25 percent of the typical family income, up from 9 percent in the 1960s, “Stalling Dreams” highlights the long-term impacts as increasing numbers of students take on student loans to finance their higher education.

Key findings in the report released in mid-September included: Default is surprisingly common: More than 25 percent of all borrowers, 50 percent of Black borrowers and 33 percent of Latino borrowers defaulted on their loans within 20 years;

Impacts on racial wealth disparities are stark: In their 30s, a typical White individual with no student loans holds more than $35,000 in wealth, while a typical Black individual is more than $10,000 in debt;

Student debt cuts into overall wealth: Having ever held student debt curtails wealth at age 30 for everyone by about $8,200, independent of the value of current student loan debt.

Harry Jackson’s (name changed) story is common. He was determined to go to college and student loans paid his price of admission.

Years later, he had two degrees, a very good job and $100,000 in student loan debt. His story is very typical of Black students trying to get ahead in America with student loans as the only key to their success.

“Student loans were the key to my pathway to higher education. It was an easy decision but now I’m saddled with debt. I have the career and lifestyle I want but I also have debt. My plans for a house are on hold because debt payments come first,” he told The Final Call.

The report emphasizes the need for alternatives in college financing and shows that the current debt crisis requires a public re-investment solution.

“While the student loan system was designed to provide access to higher education, it has turned into a debt sentence for borrowers from low wealth backgrounds, first generation and Black students,” says Institute on Assets and Social Policy associate director Tatjana Meschede, who co-authored the report.

“The student loan financing system is clearly failing our students when default is not an aberration, but instead a regular experience among student loan borrowers.” “Stalling Dreams” focuses on long-term debt holdings, defaults, and wealth holdings in the first and second decades after attending college.

The report details how higher education is a core engine of economic growth, and an educated workforce a public good that benefits all. It encourages the public to commit to supporting students in higher education, help current student loan holders as well as future generations.

Many of the 2020 presidential candidates are offering canceling student debt as a policy agenda item.

The authors of “Stalling Dreams” believe this is a crucial moment to reverse the damage of American disinvestment in higher education.

“Structural racism has made it more difficult for African American students to economically, educationally and otherwise catch up with their white counterparts. Despite making regular payments, many African American students who have attended college are disproportionately drowning in debt,” explained Hilary O. Shelton, NAACP Washington Bureau Director and Senior Vice President for Policy and Advocacy.