College debt threatens the hopes and dreams of minority students


Black and Hispanic students also graduate with higher debt, including more than half who graduate with unmanageable debt.  Black college graduates are nearly twice as likely as Whites to owe $30,500 or more, according to the College Board. 

The expansion of for-profit colleges like University of Phoenix, has also taken a harsh toll on low-income and minority students who are typically targeted by these institutions. Students who attend for-profit schools are more than twice as likely to default on federal loans as students at public colleges.

President Obama’s recently-announced “Pay As You Earn” plan, which is aimed at providing relief to 1.6 million Americans mired in student debt, is a step in the right direction. But it will not stem the flood tide of skyrocketing college costs and mounting student debt facing minority students. New data released by the Federal Reserve Bank of New York reveals that 36 million Americans hold outstanding student loans that will exceed $1 trillion for the first time.

Amidst an ongoing economic downturn and steadily rising tuitions, paying for college without taking out loans has become a luxury only the wealthy can afford. The extraordinary growth in student debt is creating a bubble that is likely to burst on the backs of hard-working students and their families, further dragging down our economy and widening racial inequities.

The college debt anchor has become a key contributor to the growing racial wealth gap, perpetuating inequalities across generations. A Pew Research Center report released this summer showed that the gap between white households and African American and Latino households is greater than it’s ever been, with the median wealth of white households 20 times that of African American and 18 times that of Latino families. 

The foreclosure crisis wiped out economic gains made by many minority families and set in motion the largest stripping of their wealth in American modern history. The average Latino family lost two-thirds of its wealth between 2005 and 2009, while Black and Asian families lost more than half of their wealth.

Not surprisingly, these families rely more on college loans, and increasingly on riskier private loans, to offset losses in home equity and dwindling savings.

Weighed down by the college debt anchor, minority students will graduate at a severe wealth disadvantage, taking years to pay off loans before they can begin to save for a home or for retirement. Repayment of student loans can haunt young people for many years. 

Unlike other debt, student loans cannot be easily renegotiated or dismissed in bankruptcy and those in default are ineligible to receive federal student aid in the future. They may have their wages garnished, deductions made from federal income tax refunds, and their credit histories ruined.

We must heed the warning of Moody’s Analytics that student loans may be the next financial bubble to burst. There are ways to avert this potential crisis. We can start by pushing private lenders to allow for more flexible, income-based repayment. We can make college more affordable by protecting Pell grants and raising the maximum amount to keep up with inflation. And we can increase the amount that can be borrowed through federal student loans. 

Without such changes, low-income and minority students will fall further behind – and our nation as a whole will pay the price.

Mariko Chang, PhD, is the author of the book, Shortchanged: Why Women Have Less Wealth and What Can Be Done About It.

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