African-American borrowers owed more on undergraduate loans 12 years after entering college than what they originally borrowed, according to an analysis that focuses on the outcomes a dozen years later of Black and Latino students who entered college in 2003-2004.
The report, issued by Center for American Progress in northwest D.C., sheds more light on the disparities between African-American and white borrowers in the federal student loan system. Examining first-of-its-kind data on long-term outcomes for student loan borrowers, the analysis revealed a stark interaction between race and student loans.
The report, which specifically focused on those who borrowed at some point for their undergraduate education, found that African-American borrowers default at higher rates, even if they graduated. Nearly half — 49 percent — of African-American borrowers defaulted on a federal student loan within 12 years of entering college, while just 21 percent of white students did.
For students that earned a bachelor’s degree, 21 percent of African-American borrowers defaulted on a loan, while just 6 percent of white students did.
Further, 64 percent of African-American dropouts from public four-year institutions defaulted on loans within 12 years of entering college, compared to 39 percent of their white peers.
At for-profit colleges, 75 percent of African-American dropouts defaulted on student loans, while 50 percent of white dropouts did.
“These new data prove that the Department of Education cannot turn a blind eye to race and student loans,” said Ben Miller, senior director for postsecondary education at the Center for American Progress and author of the report. “The worrisome results for African-American borrowers show the need to seriously rethink how higher education affordability interacts with larger structural challenges.”
Miller’s report noted that African-American students are more likely to borrow than their peers — a difference that speaks to the disparities in levels of financial means that black students have upon entry into college, he said.
The report concluded that the typical African-American borrower made no progress paying down their loans; bachelor’s degree completion doesn’t insulate black borrowers from bad outcomes; nearly half of African-American borrowers defaulted on a student loan; and 75 percent of African-American dropouts from for-profit colleges defaulted.
“These results show that the U.S. Department of Education cannot ignore the interaction of race and student loans,” Miller said. “Traditionally, the agency has not collected any data on the race of borrowers, except in irregular sample surveys conducted by its quasi-independent statistical arm. Unfortunately, not collecting this information has allowed for the disparate outcomes by race to go unnoticed.”
Seeing even African-American students who earned a bachelor’s degree struggle drives home the point that the federal student loan program doesn’t exist in a vacuum, Miller said.
The median African-American household has just $1,700 in accumulated wealth. Racial discrimination in hiring hasn’t improved over the past 25 years, and sending African-American students into an inequitable adulthood with large debts from college can put them even further behind than they are already, Miller said.
“These are not problems that will be fixed easily,” he said. “But the first step is conducting a full analysis of the problem. The Department of Education must start collecting data on the race and ethnicity of its borrowers. It should carefully review outcomes such as completion, repayment and default by race and ethnicity within institutions to identify colleges with sizable gaps in results.”
For the full report, go to americanprogress.org.