The Color of Student Debt

“Racial disparities in student debt are closely related to the stark racial disparities in wealth characterizing American society.”

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Race-based differences in student loans are little understood and often ignored in debates about higher education financing.  New research might help us to change that.  Back in 2010, the College Board noted that 27 percent of black bachelor’s degree recipients had student-loan debt of $30,500 or more, compared with just 16 percent of white bachelor’s degree students.  Of those who borrow, black students have an average of over $4,000 more debt than white students.

In “The Color of Student Debt,” researchers lay out evidence that two factors account for “over half of the black-white disparity in student loan debt.”

First, African-American families are much less likely to have wealth (as opposed to income) available to help family members attend college.  How much less likely?  Black families have, on average, six times less wealth Continue reading

Everything you always wanted to know about Sallie Mae…

From the advocates at the National Consumer Law Center comes an eye-opening report on Sallie Mae. My first thought was that the “Sallie Mae Saga” should be required reading for everyone who cares about “the dangers of relying on a for-profit publicly traded company to protect borrowers and taxpayers.”  My second thought was that it should be required reading for everyone.

Climbing the Tuition Wall

Are climbing walls driving the increase in tuition?

The Wall Street Journal has argued since since the late 1990s (sorry, the WSJ hides its light under a pay wall) that universities are able to raise tuition because the government gives students loans to pay that tuition. Universities, in an attempt to lure students, build “Club-med style amenities,” like climbing walls. But are these the drivers of the massive increases in tuition that students and their families are now expected to bear?

Not necessarily. The New York Fed points out that, since the 1980s, state subsidy for higher education has steadily decreased. Between 2000 and 2010, state funding decreased by 21%.  The economics of this are relatively simple, even for a lawyer like me:  In the face of declining state subsidy, public colleges raise tuition to cover costs.

For more information, check out these reports by the Center on Budget and Policy Priorities and the American Institute for Research.  And the situation may not improve anytime soon.  The American Institute for Research reports that the amount that tuition has been raised is not enough to make up for the gap in state funding.

Student Debt at the Intersection of Race, Class and Gender?

The vast majority of reports on student loan borrower and defaulter characteristics tend to focus on one trait– socioeconomic status, race, gender– at a time. While some authors flat-out state that they don’t intend to consider how characteristics relate to one another, for instance, socioeconomic status and race in calculating risk of student loan debt, the majority seem to simply fail to consider exactly how multiple factors might affect a student’s access to resources.

Much of the literature on student loan debt and default rates disaggregates data by single characteristics.  Nicholas Hillman’s College on Credit and the Urban Institute’s Forever In Your Debt take this approach.  Other reports and articles–like Mark Kantrowitz’s Calculating the Contribution of Demographic Differences to Default Rates, the AAUW’s Graduating to a Pay Gap, and Gross, et al.’s  What Matters in Student Loan Default?–mention intersections, but only in passing, and without sustained analysis.

Teasing out single factors is useful, but only up to a point.  If feminist theory has taught us anything over the past decades, it is that we cannot consider race, class, gender or other characteristics in isolation.  To do so is to fail to understand that people do not inhabit one identity at a time, and that the experience of multiple discrimination is the norm, not the exception.  For example, if having a child is is a “risk factor” for drop out and default, why do we not have better analysis of which students are the most likely to be the sole support for dependents?  How can we know the best way to ensure that these students benefit from higher education if we do not know who they are?

Does student debt reduce lifetime wealth?

Last week an economist asked me for my most impressive fact about student debt (yep, people in DC really do ask that sort of thing over dinner.  Maybe that’s why they don’t let us outside of the Beltway.)

Student debt swims in facts and figures, but the one that I tend to pull out a parties filled with young urban professionals is that a dual income young couple with bachelor’s degrees and an average amount of debt ($53,000) will lose over $200,000 of lifetime wealth compared to a comparable couple without debt (read the study, by Demos, here.)  A huge chunk of this loss is in retirement savings, despite the higher incomes that go with higher education.  This fact tends to bring the conversation about “why is student debt bad” home in ways that talking about the possibility of default might not.  Then people are usually better primed for the most important part of the story:  that 200K is the best case scenario.  Low-income students, students of color and students of for-profit schools — especially those who default– will see even larger lifetime losses.