66% of black borrowers say they regret taking out student loans
Student debt disproportionately affects black borrowers. Today, 86.6% of black students take out federal loans to attend four-year colleges, compared to just 59.9% of white students.
Many believe that student debt is beneficial because it can potentially improve your credit score and demonstrate your creditworthiness if payments are consistent. However, a large number of black borrowers are failing to reap these benefits, and the ongoing pandemic has only made this crisis worse. For many black borrowers, student loans are not considered “good debt,” according to a study called Jim Crow Debt by Jonathan Davis, PhD, senior research associate at The Education Trust, and Jalil Bishop, PhD.
The study, based on nearly 1,300 black borrowers, highlights the parallels between student debt and the racial wealth gap. More than half of black borrowers in the study don’t think student loans contribute to racial equality (58%) or help them build wealth (61%). Sixty-six percent regret taking out student loans that now seem unaffordable.
The desire for well-paying jobs and financial freedom puts black students at a standstill, as their need for affordable access to higher education leads them to attend colleges with “fewer resources and lower endowments” and take more loans than someone at a better level. funded institution, according to Dr. Bishop.
And after graduation, Black borrowers “navigate the labor markets, where they increasingly face discrimination that then forces them to return to higher education because they believe that a higher education degree will help them build a career. buffer against some of this discrimination in the labor market, ”he said. CNBC do it. According to the Economic Policy Institute, even black workers with a graduate degree experience a significant wage gap compared to their white counterparts, with black workers being paid 14.9% less than white workers.
Student loans themselves aren’t the only problem, so too is the way they are repaid. Income-driven repayment plans have not only helped hinder economic success for black borrowers, but 67% of borrowers report having negatively impacted their overall mental health.
IDR plans are designed to work as follows: if enrolled, borrowers have their student loan payments adjusted based on their discretionary income, and the standard 10-year repayment period is extended to 20 to 25 years – to At this point, borrowers can apply to have their outstanding student loan balance canceled. Of the black borrowers in the study who were in repayment, 72% were enrolled in IDR and felt they “re-enroll in IDR every year with no hope of repaying their balance.” Victoria Jackson, deputy director of higher education policy at the Education Trust, asks “are they really effective?”
The US Department of Education released data on borrowers who should have become eligible for IDR cancellation for 2019 and of the 2 million borrowers who should have been eligible, only 32 borrowers were been canceled, ”Jackson said. “It really is a broken program… There must be some serious structural changes that are causing people to cancel.”
Rising balances under income-based repayment plans can be a terrifying reminder of the seemingly endless payments ahead for black borrowers. Some participants in the Jim Crow Debt study likened these plans to “ankle chains”, alluding to the idea that they will never have complete freedom.
“We all know there is a long model of debt being used as a tool of racial control, whatever the intention,” says Dr. Bishop. “Jim Crow, slavery, sharecropping, that’s how the borrowers describe the debt themselves. was used as a tool to limit opportunities for blacks. “
When it comes to plans for the future, the majority of black borrowers hope for student debt cancellation. In fact, 80% of borrowers surveyed support the government’s cancellation of all student debt. Jackson believes Congress should stop “dragging its feet” and take action – before the federal student loan deferral period ends on Jan. 31, 2022.
“When we think about this looming payment deadline that will arrive starting in February of next year, it really is time for Congress or the executive to act and write off student debt.”
Millions of borrowers are about to see a change in student loan service – here’s what to do if you’re one of them
Education Secretary Cardona: “We will continue the conversations on loan cancellation”
I have repaid nearly $ 200,000 in student loans in 3 years: here is my best advice to free you from your debts
Register now: Get more information about your money and career with our weekly newsletter