Student Loan Debt Having a Negative Impact on Racial Wealth Gap

Posted By Eliana Osborn on December 23, 2015 at 3:22 pm
Student Loan Debt Having a Negative Impact on Racial Wealth Gap

Black households hold significantly more student loan debt than white ones, according to a new study from the Institute on Assets and Social Policy and Demos.  The differences are staggering and have long-reaching consequences in terms of economic mobility and wealth formulation.

For every $1 in student loan debt a white family has, a black family has $13 on average.  That same $1 contrasts to $10 in debt for Hispanic families.  These students not only need more aid to pay for college, they then face the obstacle of beginning their career lives at an earnings disadvantage and carrying high student loan debt.  According to the study, Less Debt, More Equity: Lowering Student Debt While Closing the Black-White Wealth Gap, student loan debt is one of the factors driving wealth inequality across the country.

Fewer white students have college debt at all—39% of those between 24 and 40.  For blacks of the same age, 54% hold student loans.  No matter the income level, black families are significantly more likely to have these debts.  Higher earnings usually come with a college degree, but many black families at lower income levels still have student loan debt.  Nearly 36% of black families earning less than $50,000 a year have this debt, compared to just 15.5% for whites.

The Racial Wealth Audit is a tool developed by IASP at Brandeis University. It is used to calculate the difference in student loan burdens for white and non-white students, with the goal of measuring how different policies impact the gap in wealth between races in America.  As we strive to raise the standard of living for all groups, family wealth seems to be one of the more difficult factors to address.

Asset-building is the term used to describe wealth rather than income.  When young families must use funds to pay down student loan debt, they are still earning but they are not building assets or equity.  Over time, this trend means less money to pass on to later generations as well as less influence in the social or philanthropic realms where deals and contacts are often made.  Median household wealth for black families under 40 is just $3,600 as opposed to $36,000 for similar white ones.

One proposal put forth in the report is for more student loan forgiveness, targeted to not just those who earn a college degree.  The Washington Post quotes Mark Huelsman, co-author of Less Debt, More Equity.  “A college degree has become a type of insurance policy, it’s a near necessity for entering and staying in the middle class. But it’s also become riskier as we essentially require students to borrow to get a degree, and that risk is being borne by low-income households, households of color.”

Whether it be through more student loan forgiveness or fewer loans being required to pay for college, efforts aimed at decreasing the racial wealth gap will require changes to how families are funding higher education.


Eliana Osborn
Eliana Osborn is an associate English professor at Arizona Western College, with degrees from Brigham Young University and Northern Arizona University. She’s published widely in forums such as The New York Times, the Washington Post, the Christian Science Monitor, and the Chronicle of Higher Education.

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