Why Student Debt Hits Black Americans Hardest

Students are taking on more debt than ever for an education, and Black Americans are reportedly facing more of the burden than other demographics.

On average, Black college graduates have $25,000 more in student debt than white college graduates do, according to the Education Data Initiative. And four years after graduating, almost half of Black graduates owe an average of 12.5% more than they did when they graduated. 

Compounding debt problems, college is more expensive than ever. Adjusted for inflation, the yearly tuition  at a four-year college education has increased to $28,123 in 2019 from $5,504 in 1986. 

Of Americans between the ages of 18 and 29, 34% have student loan debt. As of November 2021, 42.9 million people owe $1.57 trillion in student debt.  

How student debt affects Black Americans 

Additionally, Black graduates default on their student loans more than white graduates do. Of Black students who started college in 2004, 38% defaulted on their student loans within twelve years after graduating. This percentage is reportedly three times higher than it is for white graduates.

If you miss a federal student loan payment, it’s typically considered delinquent. You are in default on a loan if you don’t pay overdue payments by 270 days after the missed payment. When you default on a loan, the entire loan amount can be due immediately, among other consequences. Defaulting can have a negative impact on your credit score. (Note: Federal student loans have been in forbearance since the beginning of the pandemic, meaning that payments are paused and these loans have not accrued interest since March, 2020 and will not resume accruing interest through April 2022. )

Why Black Americans are disproportionately affected by student debt

The wealth gap, or the historical disparity in average household income between white Americans and Black Americans, could be a key reason for the difference in student loan debt, according to some reports from the Federal Reserve. The median household income for white households in 2020 was $74,912, about 63% more than the median household income for Black households of $45,870. 

This income disparity continues once college graduates start working, according to The Atlantic. Black Americans with bachelor’s degrees earn an average of $29.76, compared to white Americans with the same level of education, who earn on average $38.18, according to the Economic Policy Institute. Hispanic graduates fall in the middle, earning $31.96 per hour.

This wage gap increases further when gender is considered. Black women with bachelor’s degrees earn an average of $27.76, compared to white women who earn $32.02.

How can you minimize student debt?

If you are one of the many Americans with student debt, you can try these tactics to help pay off your loans. 

While federal loans can give you more flexibility, including the ability to make deferrals on payments, and options for needs-based repayment that are based on income, some private lenders can offer you lower repayment terms, that could potentially save you hundreds of dollars each year.

Another method could be paying more than the minimum amount due to the lender each month, especially during the relief period during which federal loans are charging 0% interest when you can really make a dent in the principal you owe. Paying the minimum owed can make your payments stretch on for more years than you want. If you can, even adding an extra $20 to each monthly payment can help you chip away at your debt faster.

Some people might be eligible for student loan forgiveness. To be eligible for these programs, you typically have to be involved in some sort of public work, such as medicine or teaching.

Remember to include paying off your student loans and other debt in your budget. 

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