Scott-Clayton and Li's findings
Here are the report's key findings:
- On average, blacks graduate from college with $23,400 in college loans compared to whites, who graduate with an average debt load of $16,000.
- The disparity in debt loads between blacks and whites nearly triples four years after graduation. By that time, the average debt load for African Americans is $52,726, compared to $28,006 for white graduates.
- Four years after graduation, black graduates are three times more likely to default on their student loans than whites. For African Americans the rate is 7.6 percent; among whites, only 2.4 percent are in default.
- Four years after graduation, almost half of African American graduate (48 percent) owe more on their undergraduate student loans than they did when they graduated.
- Although African Americans are going to graduate school at higher rates than whites, blacks are three times more likely to be in a for-profit graduate program than whites. Among whites, 9 percent enroll in for-profit graduate programs; for blacks, the rate is 28 percent.
Growing debt loads for black graduates and high numbers of blacks attending for-profit graduate programs: Disturbing
In my mind, Scott-Clayton and Li's most disturbing findings are set forth in the last two bullet points. First, almost half of African American college graduates owe more on their undergraduate loans four years after graduation than they did on graduation day, What's going on?
Clearly, people who are seeing their total indebtedness grow four years after beginning the repayment phase on their loan are not making loan payments large enough to cover accruing interest. Those people either defaulted on their loans, have loans in deferment/forbearance, or are making token payments under income-based repayment plans that are not large enough to pay down the principle on their loans.
Surely it is evident that people with growing student-loan balances four years after graduation are more likely to eventually default on their loans than people who are shrinking their loan balances.
Scott-Clayton and Li's finding that a quarter of African American graduates students are enrolled in for-profit colleges is also alarming. We know for-profit colleges charge more than public institutions and have higher default rates and dropout rates. It should disturb us to learn that blacks are three times more likely than whites to be lured into for-profit graduate programs.
Income-Based Repayment Plans do not alleviate the high level of student indebtedness among African Americans
The Obama administration and the higher education community tout long-term income-based repayment plans (IBRPs) as the way to alleviate the suffering caused by crushing levels of student debt. But as Scott-Clayton and Li correctly point out, new repayment options such as REPAYE "may alleviate the worst consequences of racial debt disparities," but they fail "to address the underlying causes."
Lowering monthly payments and extending the repayment period from 10 years to 20 or 25 years does not relieve African Americans from crushing levels of student debt. We've got to shut down the for-profit college sector to eliminate the risk that people will enroll in overpriced for-profit graduate programs that are often of low quality..And we've got to fundamentally reform the federal student-loan program so that African Americans and indeed all Americans can graduate from college without being burdened by unreasonably high levels of debt.
Judith Scott-Clayton and Jing Li. Black-white disparity in student loan debt more than triples after graduation. Evidence Speaks Reports, Vol. 2, #3, Brookings Institution, October 20, 2016. Available at https://www.brookings.edu/research/black-white-disparity-in-student-loan-debt-more-than-triples-after-graduation/