Repercussions of Debt

What are the repercussions of debt?

Student loan debt has several short-term and long-term consequences that lead to financial stress, mental distress, and physiological stress like insufficient sleep. Financial stresses caused by debt include falling behind on loan or mortgage payments, monthly bills, spending exceeding income, and a reliance on payday loans. Student loan debt also decreases the likelihood of home ownership or future investments, while also increasing the odds of filing for bankruptcy. Unfortunately, bankruptcy does not absolve borrowers from repaying student loans.

Approximately half of Black borrowers default on student debt, and a third of Latine borrowers do, compared to a fifth of White and Asian borrowers. Twenty years post-graduation, the average Black borrower still owes 90% of their debt. Default rates tend to be consistent over time, suggesting it isn’t any specific current economic situation that causes these differences.

Twenty years post-schooling, the average Black borrower still owes 90% of their debt.
What are the stresses of debt for students and their families?

Are default rates greater for minoritized students?

Black and Latine borrowers feel the repercussions of debt more compared to their White and Asian peers, and extends to parents who borrow money to pay for their children’s school. The racial wealth gap has increased in the last twenty years and in 2016 54% of White families were above the median income compared of 19% of Black families and 23% of Latine families. Families with higher incomes are able to make grater contributions to their children’s education, decreasing the amount of debt taken on by both the student and the family. White families have much larger savings for children’s education than Black or Latine families, and White families take on less debt for these children’s education than their Black and Latine peers. 

At what rates do minoritized students attend graduate school?

Native American and Alaskan borrowers have the highest monthly repayments, followed by Black borrowers. Approximately half of Black borrowers default on their loans, compared to a third of Latine borrowers and only a fifth of Asian and White borrowers. The odds of default are greater with lower family wealth.

At what rates do minoritized students attend graduate school?

Almost all state loan forgiveness programs are based around professional degrees, mainly education, healthcare, and law. In education, Black women makeup 14.3% of all graduates, second to White women who make up 44.2% of all graduates. Asian teachers are few at only 3.8% of a year’s education graduate degrees and certificates. 

The largest amount of loan forgiveness programs are dedicated to health care. Black women make up only 2.5% of medical school graduates, and Black men make up only 1.3%, the smallest group. Latina women are 3.5% and Latino men are 3.8%, while Asian men and women are 25%.

While law graduates are overwhelmingly White, with 62.5% of graduates, other races are graduating at relatively similar rates. Latine graduates make up 11.4% of the class, Asian graduates are at 10.2% and Black graduates are 8.6%.