Student loan debt is a struggle felt by many graduates in America, and with rising tuition costs, more and more people are feeling the financial strain of a college education. However, that debt isn’t felt in the same way by every borrower.
Due to systemic factors like the racial wage gap, borrowers of color are most likely to face financial consequences stemming from their student debt. Here’s a breakdown of America’s average student loan balances by race and the disparities that exist between demographics.
Statistics: Student loan debt by race
- Black students take out the most student loan debt for a bachelor’s degree, followed by white students, Hispanic students and Asian students.
- Four years after graduating, Black students hold almost twice as much student debt as their white peers, largely due to differences in interest accrual and graduate school borrowing.
- After graduating from college, 20 percent of Black students and 23 percent of Hispanic students are behind on their student loans, compared to 6 percent of white students.
- Out of women undergraduate borrowers, the average Black woman carries the most student debt, averaging $41,466.05 one year after graduation.
What is the breakdown of student loan debt by race?
|Race/ethnicity||Average total education loan debt|
Source: Federal Reserve
Racial disparities in student debt
In a Bankrate survey from April 2022, borrowers of color — especially Hispanic borrowers — were most likely to report needing to delay a financial decision, like buying a house or saving for emergencies, due to their student debt. Unfortunately, this is only a small piece of the puzzle when it comes to the impacts that students of color face with their student loan debt. The same survey revealed that only 28 percent of Black borrowers who have graduated with student loan debt say that college greatly opened up career and income opportunities, compared to 37 percent of white borrowers and 41 percent of Hispanic borrowers.
According to research from the Brookings Institution, Black students saw the highest cumulative percentage change in median student debt and one of the smallest percentage changes in median income from 2009 to 2019, compared to white, Asian and Latino students. The Institute for College Access and Success (TICAS) also found that in 2016, Black borrowers graduated with higher borrowing rates and more student debt than white, Latino and Asian graduates.
Race and student loan payments
The outsized effect of student loan debt on marginalized communities can take a toll on monthly budgets after graduation. TICAS estimates that the average debt for bachelor’s degree recipients with loans in 2016 was $34,000 for Black borrowers, $30,100 for white borrowers and $25,450 for Asian and Hispanic borrowers. Assuming the standard 10-year loan repayment plan and a 4.29 percent interest rate for the 2015-16 school year, here’s how those monthly payments break out:
- Black borrowers: $348.94.
- White borrowers: $308.91.
- Asian and Hispanic borrowers: $261.19.
That monthly payment gap can be even wider for borrowers with private student loans, which often charge much higher interest rates.
Higher borrowing amounts could be one factor affecting default and delinquency rates. TICAS research shows that 12 percent of white students default on their student loans within 12 years, while nearly 38 percent of Black students’ loans will be in default status in the same amount of time. The Institute on Assets and Social Policy adds that within 20 years of starting a college education, the typical white borrower will have almost 95 percent of their balance paid off; the typical Black borrower will still owe 95 percent of their principal balance in the same time frame.
The bottom line
Student loan debt in America disproportionately impacts borrowers of color. Nearly every aspect of the lending process — from origination to repayment — impacts racial groups differently, with nonwhite borrowers shouldering longer repayment timelines and higher principal loan amounts.
Borrowers who are struggling with federal student loan payments can take advantage of federal benefits to lower their monthly payments, temporarily defer payments or apply for alternative repayment options. Those with private loans don’t have uniform relief options like federal loans; however, borrowers can ask their lender about hardship and payment relief options.