A recent report by the Brookings Institution finds that the disparity in student debt between black graduate students and white graduate students more than triples just a few years after college graduation. While black college graduates owe, on average, $7,400 more on their student loans than their white graduate counterparts, the study backing the report found that several years out of college the black-white debt disparity more than triples – to an average difference of $25,000. This means that black graduates are holding onto more than double the debt of white graduates by that time.
Taking a Deeper Look at This Report
It has been well-known for a while that black students tend to graduate with more debt than white students, but there has been much less data available to track the debt several years out. The Department of Education doesn’t track debt by race, so data for researchers to work with has been limited.
Likewise, the Free Application for Federal Student Aid (FAFSA) does not ask students for information on their race, and the National Student Loan Data System (NSLDS) doesn’t either. The FAFSA and NSLDS could both be used to better understand racial disparity in student debt, but they would have to ask for racial information voluntarily, and there are no current plans to incorporate race information into their processes. Efforts are underway to connect default rates to race and thus better analyze how defaults are disproportionately affecting those of different races; but for now, they rely on private studies and not government-provided statistics.
The difference in student loan debt between black and white borrowers is statistically important, and researchers are serious about determining the causes in order to better help bridge that gap. One reason may be the cost and effectiveness of graduate schools. Some research has suggested that up to 45 percent of the gap is a result of differences in the borrowing patterns for graduate school between white and black graduate students. Only 22 percent of white graduate students take out student loans to pay for graduate school, while 40 percent of their black counterparts will do so.
One reason may be that black graduate students are much more likely to attend for-profit schools for a post-graduate education. For-profit schools are less likely to have scholarships available or the type of endowment that allows them to support graduate research. On top of this, black college graduates are also more likely to attend graduate school which means they are statistically more likely to take on graduate school debt, even discounting the disparity between attendance at not-for-profit and for-profit schools.
Many for-profit schools have been effectively shut down recently when their qualification for federal student aid was pulled. This move came after years of outspoken criticism of for-profit school motives and poor job placement results. The report discusses how the Higher Education Reconciliation Act of 2005, which increased the borrowing limit for graduate students, may have incentivized such schools to take advantage of some demographic sections of borrowers. This ended up increasing attendance and profits without providing any benefit to their students. The report also notes that while graduate school attendance is increasing overall, the for-profit school sector is the only portion of the market where black attendance is increasing at a greater rate than white attendance.
How to Bridge the Gap
So, what can be done to rectify the growing disparity between black and white borrowers? The report has some recommendations. More research is needed in this area in order to pinpoint the correct causes and find appropriate solutions. More data must be collected and made available that allows researchers to track debt by race, particularly at the post-graduate school level where the disparity is greatest.
Also, the report suggests that automatic enrollment in income-driven repayment plans could help the disparity by providing a higher level of loan forgiveness for those with the largest debt loads – which statistically are black graduate students. It even suggests that borrowers could be automatically enrolled in IBR plans. Such plans could be administered through the tax system so that monthly payments are adjusted on a yearly basis in accordance with reported income.
Easy answers are unlikely to be found to either the overall student loan debt crisis, which continues to grow, or the more specific issue of race disparity within it. One thing is for certain: avoidance of either issue will only worsen the problems. The Brookings Institute report highlights that although we aren’t fully aware of the underlying reasons, the first step is additional research into the causes.
Author: Jeff Gitlen
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