Student debt is an issue that affects more than 40 million Americans nationwide. However, it’s no secret that the student debt crisis disproportionately affects both women and people of color, who not only carry higher debt balances than their peers but also struggle to secure equal-paying jobs.

On Aug. 24, 2022, the Biden administration announced a student debt relief plan, which includes a one-time student debt cancellation for borrowers below a certain income threshold. By offering targeted relief to those coming from low-income backgrounds — who are predominantly women and people of color — the administration will be taking a small step forward in narrowing the existing wealth gap among these groups.

Key takeaways

How student loan debt impacts women

Since the 1980s, women have consistently outnumbered men in college, which is one of the reasons why a larger percentage of women are burdened by student debt than men. According to a recent report by the American Association of University Women (AAUW), 41 percent of female undergraduates take out loans to fund their college education, versus 35 percent of male undergraduates. Not only that, but the AAUW found that female students who take on debt carry a higher balance than their male counterparts, with an average balance of $31,276 at the time of graduation, compared to men’s average balance of $29,270.

There are several reasons why women borrow more to attend college than men, according to an analysis by the AAUW. First, women take out larger student loans than men because it better enables them to complete their degree programs. Men are also more likely than women to attend more affordable colleges, which allows them to complete their degrees for less.

However, the biggest piece of the puzzle is the gender pay gap. Although men and women are equally likely to work during college, women working while enrolled as undergraduates make about $1,500 less annually than men working while enrolled. Women also tend to carry more financial responsibilities than men in their households, which means they’re more constrained financially, forcing them deeper into debt.

Student loan debt affects women differently based on their race or ethnicity

Student debt affects women from all races and ethnicities, but the burden of student loans falls more heavily on Black women than any other group. While Hispanic or Latinx women borrow nearly as much as their male counterparts, Black women carry about 5 percent more debt than Black men, 20 percent more than white women and 26 percent more than white men, according to the AAUW.

The gender pay gap worsens the student debt burden on women

In 1963, pay discrimination became illegal in the U.S., thanks to the Equal Pay Act. Still, almost six decades later, women working full time earn 83 percent of what men get paid, according to the AAUW. That means student loan debt eats away a bigger portion of women’s paychecks than men’s. In fact, in a recent survey by Student Debt Crisis and Savi, one-third of women said that their student loan bill accounted for over one-quarter of their salary.

This disproportion in debt burden and wages affects women’s ability to amass wealth and save money for retirement, negatively impacting their quality of life in the long term.

How student loan debt impacts BIPOC communities

Just like women, people of color — particularly Black students — tend to carry higher debt balances than their peers. According to data by the Federal Reserve, Black borrowers had a median balance of $30,000 in student loans in 2019. That’s 30 percent more than white borrowers and 70 percent more than Hispanic borrowers.

One of the reasons students of color borrow more than white students is their family’s household income. An analysis by the AAUW revealed that average expected family contribution, or the amount of money the Department of Education estimates families can contribute toward their child’s education costs, is twice as high for white families as for Black families. That means that students of color are more likely to borrow money to pay for school, as their families aren’t able to contribute as much to their college costs as white families.

The Center for American Progress (CAP) also found that Black and Hispanic students are more likely than white students to complete their degrees at for-profit institutions. These institutions are costlier to attend and make it harder for students to secure good-paying jobs.

The racial wealth gap worsens the student debt burden among BIPOC borrowers

Data by the Federal Reserve shows that in 2019, white households had an estimated median net worth of $188,200 — more than seven times the median net worth of Black households.

A lack of generational wealth combined with lower wages and higher debt means that borrowers of color are more likely to default on their loans, damage their credit and face other long-term financial consequences. This limited ability to build wealth also means that they have to put off other milestones, such as buying a house, saving money for retirement or starting a family.

What does student loan forgiveness mean for women and BIPOC?

On Aug. 24, 2022, the Biden administration unveiled a student debt relief plan that will forgive up to $10,000 in federal student loans for borrowers earning less than $125,000 a year (or less than $250,000 a year if married). Pell Grant recipients, however, stand to benefit more from this announcement, as they will get an additional $10,000 shaved off from their balances for a total of $20,000.

According to an analysis by the Department of Education, close to 71 percent of Black undergraduate borrowers and 65 percent of Latinx borrowers are Pell Grant Recipients. The National Center for Education Statistics also found that in 2015-16, 43.1 percent of female undergraduates received a Pell Grant, versus 34 percent of male undergraduates.

Kristin Blagg, senior research associate at the Urban Institute, says that because there’s a large number of both women and BIPOC who are Pell recipients, “they are slightly more likely to be eligible for the higher forgiveness levels than others.”

“Whether this does much to narrow the broader gender and racial wealth gap is less definite, because the gap in net worth is much larger than these proposed forgiveness amounts, and not everyone is a student loan borrower,” Blagg says. “So, Biden’s loan forgiveness plan may be a very small step towards narrowing the gender and racial wealth gap, but there are many additional factors at play.”

Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators (NASFAA), adds that although the president’s plan will wipe out student loan debt for millions of borrowers, including women and people of color, it’s still not enough.

“Any debt relief must come with longer-term changes to the very system that got us here,” Draeger says. “It is critical for policymakers to turn their attention to implementing comprehensive student loan reform and tackling the root causes of college affordability to make meaningful change for these students, and prevent future borrowers from ending up in the same situation.”

The bottom line

Biden’s one-time student loan forgiveness will benefit millions of borrowers from all backgrounds and walks of life. But for women and people of color in particular, student loan cancellation represents a step forward into a more equitable future.