The country’s student loan debt continues to rise and Black borrowers are hit the hardest.
According to the latest data from the Federal Reserve, student loan debt is about $1.7 trillion. There are approximately 45 million borrowers who collectively owe more than the current market capitalization of Alphabet (Nasdaq: Goog). Student loan debt is now ranked as the second highest consumer debt category. It’s stands right behind mortgage debt and exceeds both credit card and auto loans.
President Joe Biden extended the federal student loan payment pause through September 30, 2021. However, student loan debt continues to be a top concern for Black borrowers. Although white students have higher college enrollment rates, Black students at four year public schools take on more student loan debt.
“When you look at the data and focus on Black borrowers, you see that student loans actually sit at the intersection of a few issues,” says Mustaffa Bishop, vice-provost postdoctoral scholar and Penn Graduate School of Education lecturer, in a statement. “They reflect historical patterns of racial debt traps, current issues in higher education systems, unequal opportunities in the labor market, and ongoing issues of race and racism.”
Black Borrowers Incur More Student Loan Debt
A Black Millennials Study released by Student Loan Hero shows that Black families contribute an average of less than $6,000 toward their student’s education in 2016. On the other hand, non-Black families contribute over $14,000, allowing those students to borrow 35% less in student loans than Black students.
This impact of lower out of pocket educational contribution rates compared to student loans add up. On average, Black college students owe almost twice as much as white college students at graduation. The Brookings Institution estimates that Black graduates owe an average of $25,000 more in student loan debt. While Black students owe $52,726 worth of student loan debt. It’s estimated that White students are right under $30,000 after graduation.
The wealth gap expands in the workplace. According to Student Loan Hero, Black millennials with a bachelor’s degree earned 22% less on average than their peers in 2019. The earnings gap from Black graduates ages 25-29 increased in 28 states and the District of Columbia from 2014 to 2019.
“Black students are hearing the message that higher education is accessible to them,” says Mustaffa Bishop. [They believe] that loans are the way to get there. [The narrative states] that job opportunities and economic progress for you and your family will follow from there. Black students are chasing the promise.”
He adds, “But our research shows that every step of that journey is riddled with inequality in a way that undercuts that promise.”
How Black Borrowers Can Overcome Student Loan Debt Statistics
Student loan debt has had a depressing impact on the net worth potential for Black families. A new McKinsey & Company study revealed that an estimated 3.5 million Black families (19%) have a negative net worth. An additional 4.3 million Black families have a net worth below $10,000. Debt remains the culprit behind the disturbing net worth statistics.
One way to combat the student loan crisis is through scholarships. Dr. Roshawnna Novellus, Founder of EnrichHER, raised over $600,000 to fund her college education. She earned four degrees — bachelor’s degrees to Ph.D. — by garnering scholarship support. The key to Dr. Novellus’ success was starting early. At 15-years-old, she reached out to over 200 companies to acquire funding. “
Be specific about what you want and why you want it,” Dr. Novellus shares with Business Insider. “Always follow up with those who grant you funding. [Also] reach out to big and small companies and organizations.”
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