African American college graduates are significantly more likely than their white and Hispanic peers to default on their student loans, according to a report released last week by The Institute for College Access and Success (TICAS). Its findings reveal that 21 percent of African Americans who graduated with bachelor’s degrees in 2017 defaulted on their loans, compared to only 8 percent of Hispanic and 3 percent of white degree holders.
Researchers also found that Pell Grant recipients — students from families with annual earnings of $40,000 or less — as well as first-generation students and those who attended for-profit institutions had high default rates. Specifically, Pell Grant recipients were more than five times as likely to default on their loans than their wealthier peers, and first-generation students were more than twice as likely to default as those whose parents went to college. Additionally, individuals who began their postsecondary education at a for-profit college defaulted at a rate seven times that of those who first enrolled at a public university and six times the rate of those who began their postsecondary education at a nonprofit institution.
African Americans comprise a significant percentage of each of these groups. According to the U.S. Department of Education, more than 60 percent of African American students receive Pell Grants, while 14 percent are the first in their families to attend college.
Such findings provide further evidence for the claim — made by the Center for American Progress (CAP) in October 2017 — that African American student loan holders are in the midst of a financial crisis. CAP research on black student-borrowers who entered college in 2003-2004 indicates that they had greater amounts of student loan debt 12 years later than they did when they originally took out their loans. Furthermore, those who completed their degrees still experienced high default rates, debunking the popular narrative that the biggest threat to student loan repayment is dropping out of school.
These findings have serious implications. Defaulting on student loans affects a person’s credit score, weakening their ability to make important life purchases, such as a home or car. In addition, this can lead to a portion of a borrower’s paycheck being withheld every month and can prevent borrowers from receiving tax refunds.
To improve conditions for African American student-borrowers, the authors of the TICAS study published a list of recommendations aimed at both institutions of higher education and state and federal policymakers. Included among those for colleges and universities is to set aside some financial aid resources to help students through financial emergencies and to stop “lowballing student costs” so that learners can create more realistic budgets. They also encourage state policymakers to promote income-driven repayment plans, in which students repay their loans at rates determined by their annual earnings. At the federal level, researchers recommend increased investment in Pell Grants, among other actions.
Congress is already working to make some of the suggested changes. Both the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act and the Aim Higher Bill — introduced separately by Republicans and Democrats this year — advocate for increased funding for the Pell Grant program and the removal of costly fees attached to certain student loans.
Above all, CAP researchers are urging the Education Department to collect more data to demonstrate the connection between race and student loan debt. This, they argue, is the first step toward ensuring greater equity for students of color.