Report: Student Loan Debt Stratified by Race, Class - Higher Education
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Report: Student Loan Debt Stratified by Race, Class

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by Ronald Roach


It’s well known that graduating college students in recent years have faced student loan debt at unprecedented levels far exceeding that of previous generations of American graduates. Nonetheless, a new report released by the New York-based Demos public policy organization documents the patterns of debt along racial and class lines with Black, Latino, and low-income students taking out higher loans than Whites and more likely to drop out with significant debt.

In “The Debt Divide: The Racial and Class Bias Behind the ‘New Normal’ of Student Borrowing,” Demos senior policy analyst Mark Huelsman details a system that is highly stratified along class and racial lines. The nation’s debt-financed system for college enrollment not only produces higher loan balances for low-income, Black, and Latino students, but also results in high numbers of low-income students and minority students leaving school without receiving a credential, according to the report.

The author draws upon data from three U.S. Department of Education surveys, the Federal Reserve’s 2013 Survey of Consumer Finances, and existing academic literature, for the analysis.

“I think what’s really been missing from [national discussions on student loan debt] is an understanding in how our move to a primarily debt-based system of financing higher education has impacted our notions of racial and class equity,” Huelsman told Diverse. “We haven’t seen a ton of analysis on which communities are most impacted by our shift to a high debt system.”

Huelsman said that, while college has been regarded as a key path in American society for economic mobility, its shift in recent years toward a largely debt-financed system has proceeded with little regard to how that move would impact different communities. The system now is “pushing students of color and low-income students even farther down the ladder, adding an additional level of risk that previous generations did not take on when paying for college, and saddling them with additional disadvantages as they enter the workforce,” he noted.

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“We cannot ignore the reality that our dramatic shift to a debt-for-diploma system has greatly shrunk the opportunity for economic and social mobility among young people of color and working class youth. This debt-based system has transformed higher education into a system that hardens race and class privileges rather than ameliorates them, limiting a new generation from fulfilling their dreams and utmost potential,” said Tamara Draut, the Demos vice president of policy and research, said in a statement.

Among report findings:

  • Black and low-income students borrow more, and more often, to receive a bachelor’s degree, even at public institutions. At 80 percent, the vast majority of Black graduates take on debt, compared to 63 percent of White graduates. Latino students borrow at the same rate as White students to attend public colleges and universities, but borrow at far higher rates to attend private non-profit schools (87 percent to 72 percent, respectively).
  • Black and Latino students are dropping out with debt at higher rates than White students. At all schools, 39 percent of Black borrowers and 31 percent of Latino students drop out of college compared to 29 percent of White borrowers. Thirty-eight percent of low-income borrowers drop out, compared to less than a quarter of their higher-income peers.
  • Associate’s degree borrowing has jumped particularly among Black students over the past decade. At public institutions, 57 percent of Black associate’s degree recipients borrow (compared to 43 percent of White students), and borrow nearly $2,000 more than White students. A decade ago, 38 percent of Black associate’s degree recipients borrowed (compared to 32 percent of White students). In other words, a six-point gap in borrowing between White and Black associate’s degree holders has turned into a 14-point gap.
  • Black students are substantially more likely to cite financial reasons for not completing a degree program. Nearly 7 in 10 Black dropouts cite student debt as a primary reason for dropping out, compared to fewer than half of White students.
  • Students at for-profit institutions, who are disproportionately people of color, face the highest debt burdens and dropout rates.
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Dr. Robert Kelchen, an assistant professor of higher education at Seton Hall University, said the Demos report is timely given that the U.S. Senate has recently begun hearings on reauthorizing the Higher Education Act. “In terms of policy, we’re at a good time to think about big picture policies. … And it’s worth thinking about either adding more money in terms of grant aid and, if that’s not feasible, then thinking about how to make the loan system work better for students,” he said.

Kelchen added that some research has been done by his colleagues and him looking at the differential impacts of student loan debt. “And what we’ve done is we’ve looked at wealth differences by race/ethnicity, and there are enormous differences in household wealth, particularly after the Great Recession, which disproportionately hit minority families. And so that In part explains the need to borrow. But there is still a percentage of students who need money for college but are unwilling to borrow,” he said.

Dr. Christopher Nellum, a senior policy analyst with the American Council on Education’s Center for Policy Research & Strategy, said he believes that, as the Higher Education Act reauthorization brings new attention to student financial aid as a national issue, the Demos report should help generate attention on the role of declining state higher education investment, which has been a factor driving student indebtedness.

“I do think this report hopefully will get not only our senators and congressmen to think about this issue—the issue being state investment in higher education—but getting states to think about what they’re doing and what their responsibility is to higher education,” Nellum said.

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Access to The Debt Divide can be found here.

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