Paying for college is a huge and growing financial strain for U.S. students. From 2007 to 2015, total outstanding federal student loan debt doubled from $516 billion to $1.2 trillion, according to the U.S. Department of Education.
Black students are increasingly bearing a disproportionate share of the debt burden, according to a NerdWallet analysis of loan data from the National Center for Education Statistics. The data examined student loan debt for fourth-year undergraduate students ages 18-24 who attended a higher education institution, including public or private nonprofit colleges, and for-profit schools.
In short, both the percentage of black students with student loan debt and their average loan debt are higher than among other students and are increasing more rapidly. Here’s a look at what the data show, some reasons behind the trend and what borrowers can do.
Black student loan debt is increasing more rapidly
Historically, more black students have had to borrow to pay for college than their peers. In the 1989-1990 academic year, about 69% of undergraduate black students had at least one federal or private student loan, compared with about 50% of white students, 54% of Hispanic undergraduates and 41% of Asian students.
But while borrowing by Asian students has plateaued and loans to white and Hispanic undergraduates have increased gradually, borrowing by black students increased more sharply. By the 2011-2012 school year, an astonishing 90% of black undergraduates had student loans, according to data from the National Center for Education Statistics.
The growth rate in borrowing from the 1999-2000 school year to 2011-2012 was the highest for black students at nearly 18%, compared with about 15% for Hispanic students, 11% for white undergraduates and 0% for Asian students, according to NerdWallet’s analysis.
Percentage of undergraduates (ages 18-24) in their fourth year of college with federal or private student loans:
Black students are taking on more loan debt
More than two decades ago, the average black undergraduate with student loans had less debt ($11,900) than the average for all students ($14,900). But in the following years, the average loan balance for black students shot up 155% to $30,400 in the 2011-2012 academic year.
Other students’ average loan debt also increased in that period but not nearly as sharply. The average loan debt for all undergraduate fourth-year students increased about 74%, at less than half the rate that black students’ debts increased.
Average cumulative loan amount for undergraduates (ages 18-24) in their fourth year of college with federal or private student loans:
Why is loan debt skyrocketing for black students?
Clearly, student loan debt among black students is on a fast climb, both in absolute terms and compared with other students. To find out why, NerdWallet analyzed income data and talked with experts who study student loan debt.
The racial wealth gap
It’s no secret that there’s a racial wealth gap, and that gap has widened since the Great Recession, says Sara Goldrick-Rab, professor of educational policy studies and sociology at the University of Wisconsin-Madison and founder of the Wisconsin HOPE Lab, which researches ways to make college more affordable.
“Black wealth was decimated by the recent recession in a way that white wealth was not,” Goldrick-Rab says.
Before the recession, in 2004, the median black family in the U.S. had a net worth of $25,186 while the median white family had a net worth of $168,509, nearly seven times higher, according to data from the Federal Reserve’s Survey of Consumer Finances. By 2013, the wealth gap had grown: A median black family had a net worth of $11,068, while the median white family’s net worth was $134,118 — some 12 times higher.
Net worth, or wealth, considers a family’s total assets — including a home, savings and investments — in relation to debts, including mortgages, credit card debt and student debt. When black families have fewer assets compared with debts, more students take out loans to pay for their education, says Sandy Baum, a senior fellow who studies college access and financing at the Urban Institute, the Washington, D.C.-based research group.
“They don’t have anywhere else to get the money,” Baum says.
The burden of ‘bad debt’
Black students are overrepresented at for-profit colleges, according to a 2014 report by the Center for Responsible Lending. For-profit colleges have higher tuition costs, which forces students to take out more student loans, and the schools also are associated with lower graduation rates and higher loan default rates, according to the report.
Having debt from a for-profit college is worse than having debt from a public or private nonprofit school, Goldrick-Rab says.
“There’s a really important difference between having a lot of debt and bad debt,” she says.
For example, it’s not necessarily a problem if a student with an MBA from Harvard is $200,000 in debt, Goldrick-Rab says, because that degree will likely be worth the investment. However, a student with higher debt from a for-profit college could be less likely to earn enough to repay the debt, she says.
How black students can avoid loans and manage debt
Goldrick-Rab advocates policy changes — such as making community college tuition-free — that cut college costs overall and thus lower students’ debt burden. Democratic and Republican presidential candidates have introduced proposals detailing how they would tackle the student debt crisis. Check out our 2016 election guide to learn what the candidates think about higher education.
For soon-to-be college students and borrowers with existing debt who can’t wait for fundamental changes to the college financing system, here are a few ways to make smart financial aid decisions and manage your existing debt.
Fill out the FAFSA
Families need to submit the Free Application for Federal Student Aid to be considered for student loans, grants, work-study programs and some scholarships. Submit the application as soon as possible to be eligible for the most aid. For help filling out the application, including a step-by-step tutorial, see NerdWallet’s FAFSA Guide.
Switch to an income-driven repayment plan
Students with existing loan debt can lower their monthly payments on their federal loans by switching from the standard 10-year repayment plan to an income-driven plan. Income-driven plans extend the loan’s term to 20 or 25 years, but this option also increases the total interest owed over time. However, income-driven plans offer forgiveness for any remaining loan balance after 20 or 25 years. Learn more about the various student loan repayment plans.
Apply for a federal loan forgiveness program
Forgiveness can eliminate some or all of a student’s remaining loan balance. Students who work for the government or a nonprofit, or who have an income-driven repayment plan, are eligible for forgiveness programs on their federal student loans. Learn more about student loan forgiveness.
Consider student loan refinancing
Students who don’t qualify for the other options, and who have good credit and a low debt-to-income ratio, may be able to lower their loan interest rates by refinancing. However, refinancing federal student loans eliminates some benefits, including the programs listed above as well as deferment and forbearance. Learn more about student loan refinancing.
Growth in student borrowers
The table below shows the percentage of borrowers ages 18-24 with student loans in their fourth year of college.
1989-1990 to 1999-2000 1999-2000 to 2011-2012 1989-1990 to 2011-2012
All students 19.05% 12.83% 34.33%
Black students 11.47% 17.58% 31.06%
White students 18.99% 11.21% 32.32%
Hispanic students 17.94% 14.58% 35.14%
Asian students 24.63% 0.40% 25.12%
Growth in student loan debt
The table below shows the percentage of growth in the average student loan debt for borrowers ages 18-24 in their fourth year of college.
1989-1990 to 1999-2000 1999-2000 to 2011-2012 1989-1990 to 2011-2012
All students 44.30% 20.47% 73.83%
Black students 110.08% 21.60% 155.46%
White students 38.46% 19.44% 65.38%
Hispanic students 91.92% 30.00% 149.49%
Asian students 47.69% 5.73% 56.15%
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