Report Finds Severe Racial Disparity in Student Loan Debt

According to a new report from Demos, a nonprofit progressive research and advocacy organization based in New York, there is a significant racial disparity in student loan debt in the United States.

Through their study, the research team found that it is extremely difficult for borrowers of color to pay off their loan debt. On average, White male borrowers pay off 44 percent of their loan balance 12 years after they began college, while Black women borrowers see their balances grow by an additional 13 percent and over half of Black male borrowers default on their loans within the same time period.

The researchers also found that education seems to pay off handsomely for White families while providing moderate benefits for families of color. Among households with a bachelor’s degree, the average White family holds nearly $400,000 in net worth, compared to only $68,000 for college-educated Black households. Similar racial disparities are seen in households with a high school education or less. Additionally, middle-income White households have on average four times the financial assets of Black middle-income households. Among these families, less than 6 percent of White households report being two months late on a loan, compared to over 16 percent of Black households.

In order to combat this racial disparity, the researchers suggest a number of different policy options the federal government can take. These include canceling a portion of all borrowers’ loan balances, canceling all or most debt for families below a certain income, forgiving a percentage of student loans for those enrolled in means-tested public benefit programs two years after leaving college, reforming bankruptcy laws, protecting social security from debt collection, and improving public service loan forgiveness.

The full study, Debt to Society, may be downloaded by clicking here.

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