Racial Disparities in College Lending

Written by: Reagan Flowers, Ph.D.

New research affirms that Black students attempting to turn the tide on generational poverty experience more difficulty than their peers regarding economic advancement. The debt that Black students accrue to achieve degree completion sets them on a course that includes higher debt. The decision to attend college means dreams like starting a business or buying a house become a dream deferred.

What the Data Shows

The study by the Student Borrowing Protection Center focused on the Atlanta area. They found that majority-Black Atlanta neighborhoods have seen disproportionate growth in student debt burdens. Starting in 2010, Black neighborhoods in Atlanta consistently had higher average student loan balances than predominantly white areas. Moreover, these disparities grew over ten years, despite an improved economy and labor market. By 2018, average student debt in majority Black zip codes was nearly $7,000 more than in majority-white zip codes, compared to slightly more than $1,500 in 2010.

Researchers also found that the pandemic-related pause on student loan payments brought short-term relief but caused even more long-term problems. During the pause, distress in majority-Black Atlanta neighborhoods fell to nearly 1/10th of pre-pandemic highs. At the peak of distress for majority-Black neighborhoods in 2015, nearly 1 in 5 households with student debt (19 percent) fell behind on their student loans. Due to the pause on student loan payments, delinquency rates in these neighborhoods fell to approximately 2 percent.

Despite the short-term benefits of paused payments, borrowers in Atlanta’s majority black neighborhoods struggle with debts whose balances have not declined year over year. The number of borrowers—especially in majority-Black zip codes with non-declining balances—has more than doubled over the past decade. Prior research indicates that approximately two-thirds of Black borrowers nationally see balances climb 12 years after beginning college, compared to only 1 in 9 white borrowers.

What This Means for Today’s Students

If things don’t change in the coming years, these financial disparities will continue to increase. As a result, the ongoing financial burden will outweigh the promise and opportunity of college degrees and STEM careers.

In addition, with Black STEM professionals earning only 78 percent as much as their white counterparts, building stronger financial futures will prove incredibly difficult.

How We Can Help

Providing supplemental services for predominantly Black communities will help students reduce learning gaps. It makes a difference because the resulting domino effect helps underserved and underrepresented students be better prepared for high school and beyond. They will also have more opportunities to compete for college scholarships and paid internships.

Opportunities like scholarships and internships will play a crucial role in helping these students live out their dreams without crippling debt. Wide-scale efforts are needed to raise awareness like this blog; schools, companies, and organizations will pay more attention to these disparities in developing opportunities and selection processes.

We must also continue fighting to close pay gaps. Some good news is that, with the increase in remote work due to the pandemic, we are seeing more pay transparency in job postings. Some states are even passing laws to increase pay transparency. If this trend continues, it could increase equity for Black professionals.

In summary, if things do not change, financial disparities will continue to increase, outweighing the promise and opportunity of college degrees and STEM careers. One solution to this problem is providing supplemental services for predominantly Black communities to reduce learning gaps and provide opportunities like scholarships and internships. Additionally, closing pay gaps and implementing student loan forgiveness with reasonable requirements could make a big difference for today’s borrowers to achieve their entrepreneur and home ownership dreams more attainable as young adults. As a result, it places them in a better financial situation to help change things for the next generation.

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Please join us at The Junior League of Houston from 7:30-9:00 AM