#61 Black And Latino Students Disproportionately Bear The Burden Of The Student Debt Issue
Episode Description:
Today, 45 million Americans collectively owe $1.7 trillion in student loans. The failure by policymakers, regulators, and industry at every stage of the student loan lifecycle has driven nine million student loan borrowers into default, two million behind on payments and an entire generation of borrowers that have been left behind as student debt impacts their retirement savings, owning a home, forming a family, or starting a business. However, according to research, Black and Latino students with individual student loans are disproportionately bearing the burden of the student debt issue.
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Episode Specific Hashtags:
Today, 45 million Americans collectively owe $1.7 trillion in student loans. The failure by policymakers, regulators, and industry at every stage of the student loan lifecycle has driven nine million student loan borrowers into default, two million behind on payments and an entire generation of borrowers that have been left behind as student debt impacts their retirement savings, owning a home, forming a family, or starting a business. However, according to research, Black and Latino students with individual student loans are disproportionately bearing the burden of the student debt issue.
What is going on everyone? This is the LEO podcast… where we talk about various educational topics… especially those impacting the Latin American community.
For today’s episode, we’ll be talking about a report by the “Student Borrower Protection Center” a consumer advocacy group that analyzed previous borrower data prepared by regional Federal Reserve banks and the city governments of New York City Washington, D.C., Philadelphia, and San Francisco and concluded that one thing all these cities had in common was that students in majority Black and Latino neighborhoods rely more on student loans and also take on more debt.
I’m your host kevin muñoz, this is today’s free episode if you want early access to episodes and bonus episodes you can find that right now on our patreon.com/latinamericaneo and if not then enjoy this one!
Topic 1:
What people don’t understand or maybe just refuse to understand is the racial disparities throughout the student loan lifecycle begin way before a promissory note is signed or even before the financial aid award letter arrives. These disparities proven by the research from the Student Borrower Protection Center” are caused by the racial wealth gap.
After taking on more debt than their white peers, black and Latino students then enter a workforce where discrimination and disparities affect their ability to repay their loans. This systemic racial discrimination when seeking employment and wage discrimination once they are hired leave black and Latino borrowers shortchanged by a system that delivers fewer financial returns from their education than it does for their white peers.
Did you know that black and Latino families headed by two adults with a college degree earn 80 percent and 70 percent, respectively, of what white families earn with the same education level.
This number is even worse for Black women, who make 63 cents on every dollar paid to white men with the same degree. This is a vicious cycle. Think about it right, Black and and latino borrowers are forced to borrow more than their white peers yet systemic discrimination causes these borrowers to earn less throughout their careers resulting in only adding to an already crippling student debt burden.
“By piling hundreds of billions of dollars in new debt on the communities that are least able to shoulder this burden, the student debt crisis has become a key structural feature of the sharply unequal 21st-century American economy”
So let’s talk about the facts and the numbers because data matters. Now, according to a report by the Consumer Financial Protection Bureau titled “The Significant Impact of Student Debt on Communities of Color” Ninety percent of black and 72 percent of latino students take out loans to attend college in comparison to 66 percent of white students, and on average, black borrowers take on nearly 50 percent more debt for a Bachelor’s degree than white peers.
On average, 20 years after starting college, the median black borrower still owes 95 percent of their original student debt balance, while the median white borrower has paid down almost 95 percent of their original balance. Twelve years after starting college, the median latino borrower still owes 83 percent of their initial student loan balance while the median white borrower owes only 65 percent of their original balance.
However, research additionally notes that even when accounting for differences in degree attainment, college GPA, and post-college income and employment, the black-white student loan default gap is still 11 percent.
During the past three years, four major U.S. cities that are cumulatively home to more than 11.5 million people and roughly 1.6 million borrowers partnered with their respective regional Federal Reserve banks to analyze the impact of student loan debt within specific neighborhoods across their municipalities. These reports collectively offer a comprehensive look into the systematic disparities that exist within our student loan system, and in particular, within the black and latino communities.
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So let’s go over their findings.
What was common across all of these municipalities is 1) Black and Latino communities shoulder increased borrowing and debt burdens 2) borrowers from these communities struggle to make student loan payments at disproportionately high rates and 3) the share of black and Latino populations increases in a given community so does the legacy of continued segregation and student loan defaults.
Black and Latino borrowers take on more debt to finance higher education. Nationwide, the student loan borrowing rate in black-majority and Latino-majority zip codes is 23 percent and 17 percent, respectively. For white-majority zip codes, it is only 14 percent. In fact, the highest and fastest-growing student loan balances nationwide are found in majority black communities. The average student loan balance is highest in black majority areas, at more than $37,000 – roughly $3,000 higher than the national average.
Let’s take a look at the Federal Reserve data by individual municipalities which raises an even greater cause for alarm.
For starters Washington, D.C. over the last decade, the highest rate of growth in student debt in the District of Columbia were concentrated in majority-black communities. During that time, median student debt balances in the District increased in majority-black neighborhoods such as Brookland and Deanwood by as much as 217 percentage, while median debt balances decreased by up to 30 percent in neighborhoods like Adams Morgan, DuPont Circle, and Foggy Bottom. None of which are less than two-thirds white. Six of the eight neighborhoods with the fastest growing rates of student debt are majority-minority and in fact, five of those eight neighborhoods are at least 72 percent non-white.
For Philadelphia, the ratio of median student loan debt to median annual income is roughly two times as high across neighborhoods that are at least 80 percent non-white when compared to neighborhoods that are at least 80 percent white ( 63 percent vs 32 percent)
For San Francisco, the ratio of student loan debt to income is twice as high in majority-minority neighborhoods as it is in majority-white ones.
And in New York City the burden of student debt is heaviest among black and Latino communities. Among the twelve New York City neighborhoods with the most student loan borrowers, ten are at least 63 percent non-white, and eight have populations that are at least 75 percent non-white. Simply put, student loans impose the heaviest weight on borrowers in predominantly black and Latino neighborhoods, all while borrowers in those neighborhoods are most likely to take on student loans.
The outcomes from all these cities are as follows. A borrower in a majority-minority neighborhood is 2.6 times more likely to fall behind. A borrower in a 75 percent-minority neighborhood is 4.2 times more likely to fall behind. And a borrower in a 90 percent-minority neighborhood is 5 times more likely to fall behind.
Conclusion/Closing remarks:
And so as the report concludes…” from coast to coast, cities have exposed how America’s $1.7 trillion experiment in debt-fueled higher education has failed. Where higher education once stood as a promised gateway to the middle class, the reality is much bleaker. The disparities in the student loan market rival outcomes borne of the most predatory redlining tactics perpetrated by unscrupulous lenders. This cost is uniquely borne by borrowers of color, particularly black and Latino borrowers – all incurred simply because they chose to pursue the American Dream.
And in communities where borrowers disproportionately fall behind on their student loans, entire neighborhoods
are left to deal with the macroeconomic fallout of a diminished ability to access housing, credit, and even
employment, all exacerbated by student loan debt. These issues only compound the longstanding effects of
discriminatory economic policy and predatory inclusion that many of these communities confront daily. Taken
together, the cumulative effect of the crushing cycle of student debt on communities of color reinforces systemic
racial inequities.
For too long, the perpetuation of these unconscionable racial disparities has persisted under the ill-conceived
and dangerously naive notion that student debt is “good debt.” It is time to break this cycle for the millions of
borrowers disproportionately struggling with this debt now, and also for those poised to see their communities
buried under it if the status quo remains
America’s student debt crisis is a civil rights crisis.
THE END
That’s all for today on the LEO podcast. I’m Kevin Muñoz and as always feel free to send me a message with your thoughts or with any interesting topic that you’d like to see covered.
and for those of you on Patreon, I’ll see you there.
Otherwise, I’ll see you all in next week’s episode!
