Our Student Debt Crisis is Partly a Manifestation of Systemic Racism

    Deirdre Clute
  • February 3, 2021

Graduation is typically a moment of celebration and accomplishment. Yet, before life after college has even begun, Black students hold $7,721 more debt than their White peers on average. And that’s just at the start.  Given that students on average take 20 years to pay off their loans, that $7,721 difference grows to over $25,000 extra that Black students owe on average over time. 

When looking at these stats, it’s important to not just focus on the absolute numbers. Of course, absolute numbers don’t mean much alone. That $25,000 of extra debt burden has consequences beyond the money lost. Student debt deters borrowers from starting a family, buying a home, or investing for retirement. Years of paying down loans instead of investing in a 401k leaves borrowers without access to a sufficient financial safety net later in life. 

Peeling off additional layers uncovers even more racial inequity in education finance. Public funding helps provide schools with additional resources and opportunities for students and helps keep tuition costs down. Yet, public funding isn’t distributed equally among schools. In 2014, one study found that funding for just four predominantly White institutions was greater than all four-year HBCUs (historically Black colleges and universities) combined – 89 of them! 

More importantly, discrimination in the job market blocks Black graduates from reaching the same high-paying jobs that White graduates receive. This all-too-familiar racial pay gap further deteriorates the financial stability and security of Black borrowers. It inhibits their ability to repay their debts, increases their rates of defaults, and damages their long term credit scores, making their other financial decisions more and more difficult over time. Twelve years after the origination of a loan, Black students on average hold 110% of their original loan amount while their White counterparts hold only 60% of their original loan amount.

The numbers can be numbing, but they tell thousands of stories of  people who are being held back, and held down, by inequity. 

Deirdre Clute