For many Black students, a college degree is sup- posed to promise success. But for too many, the success comes with a heavy price, student loan debt. With Black borrowers carrying the highest student loan balances and lower post graduate earnings. They are struggling with repayment at unreasonable rates, the dream of higher education is turning into a financial nightmare, widening the racial wealth gap instead of closing it.
The racial wealth gap plays a major role in this disparity. The average Black family, holds significantly less generational wealth than white families, meaning there are fewer resources to pay for college out of pocket. As a result, Black students are more likely to take out loans, borrow larger amounts, and rely on federal assistance to afford tuition. What is thought to lead to financial security (a degree), often becomes a long-term economic setback.
Studies show that after attending a four-year university, nearly half of Black borrowers owe more than they originally borrowed. Student loans delay homeownership, business ventures, and retirement savings, Black borrowers are left fighting an uphill battle for financial stability in a system that was never intended for them to win. The numbers don’t lie, according to data from the Education Data Initia- tive, Black students typically graduate with around $25,000 more in student loan debt compared to white students, on average Black students owe 188% more than white students. The default rate for Black borrowers is five times higher than for white borrowers.
The Department of Education has removed access to applications for in- come driven repayment (IDR) plans in response to a court order. The SAVE plan is an IDR option created by the Biden administration; the courts have put a pause on this plan. According to ‘The Hill’, president and co-founder of the Student Debt Crisis Center, Natalia Abrams said, “Let’s be clear. This was a purposeful decision by the Trump Ad- ministration to harm borrowers and in no way needed to be done. Shutting down access to income-driven repayment plans was not the decision of the 8th Circuit, it was a malicious move by the Administration that will create serious hardship for millions of working families.” For Black borrowers, the issue is much deeper than personal finance, the job market, and lending practices.
Wealth is often passed down through generations, providing financial security, and opportunities for future generations, but because of centuries of racial discrimination in housing, employment and banking Black families have significantly less genera- tional wealth than white families. The net worth of a white household is 8 times higher than the net worth of a Black household, according to Lend- ing Tree between 2019 and 2022, the median net worth for Black families skyrocketed by 57.8% to $41,000, while the median net worth for white families spiked by 29.7% to $284,310. This financial gap means that before most Black students even step foot on a college campus they’re already at a disadvantage compared to white students.
Predatory Lending is a lending practice that uses unfair an abusive loan terms on borrowers including high interest rates, and high fees. Studies show that Black borrowers are more likely to be steered into high interest loans and predatory lending programs, worsening their debt burden. Black borrowers usually rely on federal PLUS loans, which come with higher interest rate and fewer repayment protections. Studies show that private lenders charge Black bor- rowers’ higher interest rates than white borrowers with the same credit profile. Even after degrees are earned, Black graduates face wage discrimination that makes it harder to pay back loans. Research shows that Black workers, even with the same or higher qualifica- tions than white workers earn less and face higher unemployment rates.
Studies show that the starting salary for Black graduates is on average, 17% lower than that of white graduates. 10 years post grad, Black professionals still earn significantly less than their white counterparts in the same fields. Hiring discrimination is also a factor, meaning that Black graduates struggle more to secure well-paying jobs, forcing many into lower-paying industries, underemployment or at times unemployment. With lower wages and fewer opportunities for advancement, Black borrowers take longer to repay loans, accumulate more interest, and face higher default rates, which leads to financial instability that last for decades.
Beyond the numbers, the weight of student loan debt can take a psycho- logical toll on Black borrowers. Many delays major life milestones like buying a home, starting a busi- ness, or even having children due to fi- nancial instability. The constant stress of repayment can lead to higher rates of anxiety and depression. The cycle of debt traps future generations, if par- ents are struggling with student loans, they are less likely to save for their own children’s education, continuing the cycle of financial hardship.
The idea of student loans were meant to be a steppingstone to better oppor- tunity, but for many Black borrowers, they have become a financial trap. From the racial wealth gap, predatory lending, wage disparities, and systemic barriers have made it harder for Black students to succeed after college, keep- ing them in a cycle of debt that pre- vents true economic mobility. Efforts like President Biden’s Loan forgiveness plan, IDR plans, and HBCU funding initiatives have been able to help some Black borrowers. However, President Trump and his administration is try- ing to do away with all of those things.
Policies like total loan forgiveness, zero interest plans, and an increase in financial literacy programs will help the Black community and Black borrowers. Black borrowers can also navigate the system by continuing to advocate, using scholarships, and alternative educational paths.
