It’s no secret that nearly 46 million Americans owe $1.6 trillion in student debt. That top-line statistic, however staggering, masks a painful disparity driven by race: BIPOC borrowers graduate with far more debt than their white peers and far fewer personal and generational resources to repay their loans.
The consequences of ballooning student debt are immense: less financial freedom, fewer career opportunities, and increased personal stress. What’s more, these effects compound on each other:
- Two-thirds of respondents told Buried in Debt, a 2018 survey of student loan borrowers, that they didn’t have $1,000 in savings.
- Most reported lopsided debt-to-income ratios (average total debt was 50% higher than annual income).
- Loan repayment consumes the lion’s share of individual income, outstripping monthly payments for mortgages, health insurance and groceries.
But the burden, however substantial, is not equally shared. Among Black and Latinx survey respondents, 80% and 75%, respectively, did not have access to $1,000 in savings—and nearly one in three doubted they could make their next month’s loan payment. Borrowers of color also reported that difficulties with repayment complicated credit checks, which are often required for housing or job interviews.
Additionally, people of color face systemic discrimination in both wages and employment, which makes repayment even more challenging. Typically, households that include two degree-holding Black adults earn 80% of the income of similar white households; Black women earn 63 cents to every white man’s dollar.
Debt, demographics, and disparate impact
Vast gaps in intergenerational wealth can be traced back centuries—and are evident today, when the median net worth of Black households is one-tenth of white Americans. This chasm undermines the ability of Black students to pay for college and graduate school, generating a vexing cycle: Black students assume greater student debt, have higher rates of default on that debt, and suffer outsize economic, professional, and mental-health consequences.
This sweeping disproportionate impact contributes to and perpetuates a devastating intergenerational crisis: Students of color taking out loans today are more likely to have children that will take out student loans in the future—debts which persist beyond death.
On average, Black students graduate with over $23,000 in debt and few or no family resources to help with repayment. White students graduate with far less debt, and greater access to family resources. Accordingly, white borrowers pay down about 10% of their loans each year, more than twice the rate of Black borrowers.
The disparity amplifies over time, as Black borrowers’ student debt climbs to nearly twice the debt of white borrowers. While the goal is to pay down student debt balances, in practice that’s not always the case. For every white graduate whose loan balance grows after graduation, three Black graduates experience the same unwelcome growth.
More than 8 million of the 46 million Americans carrying student debt are in default, which can lead to liens on wages and tax returns, plummeting credit scores, and lost eligibility for federal loan savings and forgiveness benefits. Black borrowers are five times more likely to default than white students, especially at for-profit institutions, where two-thirds of Black graduates are in default. The reality? One in four borrowers of color are in default on at least one loan, with potentially disastrous consequences.
Making a difference
Companies truly committed to their workforce recognize the range of challenges student debt imposes, from personal economics to mental health. The shared uncertainty and general unpredictability of living through a pandemic makes these concerns even more acute and underscores the need for clear, cogent information.
Borrowers say they’re confused about student loan repayment, confusion that’s increased by loan-servicers leaving the market and moving-target CARES Act deadlines, now extended through January 31, 2022. Employers of choice recognize that vital facts and guidance empower their workforce carrying student debt.
Borrowers of color may not know about income-driven repayment programs or other strategies to consolidate or forgive their debt. Sources of reliable, trustworthy information are few; too often, loan servicers provide incomplete information or fail to announce sudden charges. This is where DEI and HR leaders can step into the vacuum and offer information and advice to help borrowers better manage their debt.
Providing employees with practical, proven solutions to lessen their debt burden—through debt restructuring, repayment strategies, or loan forgiveness, for example—contributes to a more equitable workplace and a more successful, less-stressed workforce. For people whose career decisions are driven by their student debt obligations, solid, trustworthy guidance and DEI-driven HR support translates into investment in their mental health and well-being.
Supporting employees with student loan debt can help people live better, more financially stable lives, and strengthen communities of color. The same initiatives help employers of choice attract stronger and more diverse talent and lay a concrete foundation for all employees’ inclusion and long-term success.
With student loan repayments scheduled to resume in February and equity a prime concern for employers of choice dedicated to attracting and retaining the strongest talent in the marketplace, there’s no time like the present to open the doors to opportunity and financial health.
Learn more about how DEI leaders can advance equity in a Summer demo.