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New federal data show a student loan crisis for African American borrowers

Ben Miller | 10/19/2017, 6 a.m.

Unfortunately, 12 years after entering college, the median African American borrower owed more than they originally borrowed. By contrast, the typical Latino and white student had made progress retiring their debt. Although this problem is not new, the situation has gotten worse, with the African American students who began college in 2003-04 owing 113 percent of what they originally borrowed. By comparison, African American borrowers who started college in 1995-96 owed 101 percent a dozen years later.

  1. Bachelor’s degree completion does not insulate African American borrowers from bad outcomes: The common narrative in student loan policy today is that dropping out is by far the biggest threat to repayment. Unfortunately, even African American students who completed a bachelor’s degree still struggle to repay their loans. Twelve years after entering school, the typical African American borrower who completed a bachelor’s degree owed 114 percent of what they originally borrowed. The corresponding figure for white students is 47 percent, and the figure for Latino students is 79 percent. The results for African American students also cannot be solely attributed to income. Overall, the median bachelor’s degree graduate who received a Pell Grant and also borrowed owed 80 percent of their original balance 12 years after entering.

The story holds true for every level of attainment, or lack thereof. Regardless of whether they graduated or dropped out, the median African American student owed more than they originally borrowed.

  1. Nearly half of African American borrowers defaulted on a student loan: One of the reasons African American borrowers may carry debt burdens higher than their original loans is that they are highly likely to default on their loans. Forty-nine percent of African American students who borrowed for their undergraduate education defaulted on a federal student loan.

The default rate for African American students is high even for those who succeeded. For instance, nearly one-quarter of African American borrowers who completed a bachelor’s degree defaulted on the loan, compared with 9 percent of all borrowers who earned this credential. Even African American bachelor’s degree graduates who started at a public four-year institution had a default rate of nearly 25 percent. Similar to the amount owed, the results for African American borrowers are worse than those for Pell Grant recipients overall. The results also show the need to rethink loan policies for certificate programs. A majority of African American or Latino students who borrowed and completed one of these credentials defaulted within 12 years of entering college.

  1. Seventy-five percent of African American dropouts from for-profit colleges defaulted: Nowhere is the default problem worse than for individuals who attended a private for-profit college but didn’t finish. Twelve years after first entering college, three-quarters of African American students who borrowed and dropped out of a private for-profit college had defaulted on a federal student loan.

Admittedly, the default rates for dropouts are still bad in other sectors. Nearly two-thirds of African American borrowers who dropped out of public or private nonprofit four-year colleges defaulted on their loans within 12 years of entering college.