Student loan debt has a lasting effect on Black borrowers, despite the latest freeze in payments

After Richelle Brooks earned her bachelor’s degree in behavioral science in 2012, she didn’t immediately enter the workforce. Instead, she continued to study, staying in school for eight more years. Brooks loves learning, but her decision to continue her education was also the easiest way she could defer paying her student loans – which would eventually total more than $230,000.

It was only in 2020, when the administration of President Donald Trump suspended payments on federal student loans amid the COVID pandemic, that Brooks finally allowed herself a reprieve from education, after earning–in addition to her bachelor’s degree–two master’s degrees, a teaching certificate, a doctorate in education in 2018 and taking computer science classes at a local community college.

Brooks, 34, is now a principal at Matrix for Success Academy in South Central Los Angeles. She was the first in her family and one of only a few among friends to get a post-graduate education. She also has student loan debt that she believes she will never be able to repay.

“It would be different if my only responsibility in life was to pay this nearly $250,000 debt balance. If that was my only thing that I had to do in life, I may be able to do it,” said Brooks.

“But no – I’ve got two kids. My daughter will be in high school next year. My son will be in eighth grade. I’ve got a car note, I’ve got rent, I’ve got health care.”

Brooks isn’t alone. Americans, in total, owe nearly $1.75 billion in student loan debt with more than 44 million people owing, according to a 2020 NAACP report.

Among 2016 graduates, nearly 40 percent of Black students left college with $30,000 or more in debt, compared with 29 percent of white students, 23 percent of Hispanic students and 18 percent of Asian students. Additionally, 86 percent of all Black students graduated that same year with debt of any amount, compared to 70 percent of white students, 67 percent of Hispanic students and 59 percent of Asian students.

Though President Joe Biden announced on April 6 that he will again extend relief for federal borrowers, pushing the payment start date back to September 1, his administration hasn’t taken any substantial steps toward permanent relief. That leaves many Americans stuck with thousands of dollars of debt, hindering their abilities to plan for the future and invest in assets that would help grow intergenerational wealth. This is particularly damaging for Black Americans, as systemic inequities often hinder the ability to compete on a level playing field in the workplace.

“I’m drowning every month,” Brooks said. “Like every month, I’m trying to figure out how to get through the month and stay afloat.”

Biden’s promises

During the last presidential election, some Democratic candidates pushed for broad cancelation of all federal student loan debt. Biden also had a proposal for student loan debt, albeit a more limited one, in which $10,000 in federal student loan debt would be forgiven for all borrowers. He also promised on the campaign that he would forgive all the debt of students attending public schools, historically Black colleges and universities or private minority-serving institutions if borrowers had a yearly income of under $125,000.

A student loan freeze went into effect in March of 2020 at the onset of the pandemic through congressional action. After taking office, Biden continued the freeze on loan payments. The loan freeze has been extended multiple times in the past two years– the administration’s latest announcement marks the seventh time the repayment deadline has been extended. Still, the administration has not taken further action for more permanent loan forgiveness– in fact, during his latest announcement, Biden asked borrowers to begin preparing themselves for the resumption of payments.

Senator Elizabeth Warren speaks during a news conference held to reintroduce a resolution to cancel up to $50,000 of student loan debt, at the Capitol in Washington, U.S., February 4, 2021. Photo by Kevin Lamarque/REUTERS

Democrats like Senators Elizabeth Warren and Majority Leader Chuck Schumer have been pushing the administration to cancel $50,000 through executive action; a 2019 study found that $50,000 of federal student loan cancellation would eliminate all student debt for 93 percent of Black low-income households that hold student debt. But the administration has avoided taking any unilateral action, in part because of possible legal concerns about forgiving such a massive amount of debt, but also because of a political calculus.

An Economist and YouGov poll from January found that nearly half of all Americans and 70 percent of Democrats support forgiving student loan debt from public colleges and universities, and new poll by Student Borrower Protection Center and Data for Progress found that three quarters of Black likely voters and 80 percent of Latino and Latina likely voters support government canceling some to all student debt. Despite the popularity among his base, and in particular voters of color, Biden has punted the responsibility to Congress.

Some Republicans however see broad debt cancellation as “reckless” and do not believe it is a solution to the rising cost of college. Republicans on the House Committee on Education and Labor have said that broad cancellation would burden taxpayers, worsen inflation and disproportionately benefit high-income borrowers. Many have said that a move by the administration on the matter would be “appeasing the progressive wing of the Democratic Party.”

“We’re still looking at administrative options,” White House press secretary Jen Psaki has said when asked about debt relief. “ … if Congress were to send [Biden] a bill to cancel $10,000 in student loans — in student debt, he’d be happy to sign it,” she said to NewsHour on April 8.

But Congress is far from introducing any legislation on loan forgiveness, and the administration hasn’t shied away from bold executive action that may face legal scrutiny in the past on other issues like immigration or climate change.

Other strategies from the administration include expanding existing programs like the Public Service Loan Forgiveness (PSLF) Program, which was designed to provide debt relief to public servants like teachers, nurses and firefighters. Education Secretary Miguel Cardona announced changes to PSLF that will come this year and could result in an estimated 22,000 borrowers being eligible for their federal student loans to be discharged completely.

Not “good debt”

The debt crisis’ impact on racial wealth disparities are stark.

“Black households are more likely to hold student loan debt than white households,” explained Persis Yu, policy director and managing counsel at the Student Borrower Protection Center.

“Black students rely on student loan debt to a higher percentage than their white peers as well as take on more debt than their white peers,” Yu said.

That’s at least in part because Black students’ parents tend to have lower total incomes, according to the NAACP report. Forty nine percent of Black students’ parents made less than $35,000, while 69 percent of white students’ parents made more than $70,000.

“Put simply, Black borrowers both acquire more debt and, due to wage and employment inequities in the labor market, are in more precarious positions when it comes to their ability to repay,” the authors write.

Twenty years after starting college, white borrowers’ median student debt fell to 6 percent, whereas the median Black borrower still owed 95 percent of their loan, according to a 2019 report by the Institute on Assets and Social Policy (IASP) at Brandeis.

Student debt has often been thought of as “good debt,” said Jalil Mustaffa Bishop, assistant professor of education at Villanova University, and one of the authors of the NAACP report. That’s because in theory, student debt results in a degree that allows borrowers access to higher-paying jobs and the ability to both pay off the debt and generate more income.

But that’s generally not the case for millions of low-income borrowers, and it’s especially untrue for those whose post-graduate salaries are unlikely to be high enough to pay down more than a small amount of debt. The Brandeis report found that in their thirties, a typical white person with no student loans holds more than $35,000 in wealth, while a typical Black person is more than $10,000 in debt–making them nearly four times poorer than their white counterparts in general.

And a government report from 2017 found that only six percent of white borrowers owed money and were behind, while 20 percent of Black borrowers were behind on loans. Meanwhile, 53 percent of white borrowers had paid off their loans, compared with only 24 of Black borrowers who had done so. The remainder of borrowers for each group were up to date on payments, the report found.

On average, Black students enter college already disadvantaged, said Bishop, who surveyed more than 1,500 Black graduates with student loan debt. The resulting report, titled “Jim Crow Debt: How Black Borrowers Experience Student Loans,” shows Black borrowers tend to come from lower-wealth households and communities, then graduate into a labor market unwilling to pay them as much as their white counterparts due to systemic issues and racial inequalities.

“Black borrowers, and really student loan borrowers overall, are not making enough income to really be able to repay their student loans on the 10 year standard repayment plan,” Bishop said.

WATCH: How student loan debt disproportionately hurts Black borrowers

And according to data from the Federal Reserve, Black and Hispanic education borrowers are more likely than white borrowers to be behind on their loan repayment and are also less likely to have repaid their loans.

As a result, those borrowers are more likely to default, or end up on an income-related repayment plan, which determines the monthly minimum a borrower can practically pay. Those payment plans, Bishop said, can turn into lifetime debt sentences, since borrowers are rarely paying enough to make a dent in the principal. Though they pay every month, their debt never shrinks.

An alternative to paying debt is to remain a student, as Brooks did. Borrowers who are in school can defer their loan payments until they graduate, so many choose to further their education. Some Black borrowers also view graduate school as a way to increase their job opportunities in the face of racism in the labor market.

Black people who graduate with a bachelor’s degree are slightly more likely to attend graduate school than white people, Bishop said. “And there’s a hope that even though they’re going to take on more debt, that maybe they can come out on the other side making more money to service this additional debt plus their original debt.”

Intergenerational wealth

While the majority of the holders of student debt are white households, Yu said that the impact of student loans on the racial gap was still substantial, even when incomes were better. Wealth, said Yu, is the net worth of a person and the total value of their assets accumulated over time, while income is the salary or wage a person receives.

“Black families, for example, may have substantial incomes, but have very little wealth, statistically speaking, versus white families who may be more able to afford to take a lower paying job because they have familial wealth backing them up,” Yu said.

As a result, the cost of student loan debt on Black borrowers is higher than just their monthly payments. Being saddled with such substantial debt often causes graduates to postpone other financial investments, like owning a house or purchasing a car, that could help contribute to building intergenerational wealth, said Andre Perry, senior fellow at The Brookings Institution and who himself holds student loans.

“It also influences your job choices. People are more likely to take a job to pay off their debt rather than take a job for the things that they love. And so this debt is really giving Black Americans fewer options when in fact, we need Black Americans to have more options given the labor market,” Perry said.

Because communities of color don’t typically have the same kind of intergenerational wealth as white borrowers, the burdens of borrowing may also fall onto their families. Many of these communities are paying the way for siblings, cousins and parents.

“The impact of any one borrower is going to be filled by a much larger community of people and I do think that the data shows that it is disproportionately felt and burdens borrowers of color and Blackborrowers in particular,” Yu said.

Brooks knows that her loans hold her back financially.

“We’re doing what we think is best for our families and we’re going to school in hopes that we gain, you know, what’s promised to us – gainful employment.” Brooks said.

“I don’t want to only pass this debt. I want to have resources and wealth and property and things to pass on to [my children]. And there is just no way that I can provide that, and I’m in the position that millions of other Black women and marginalized folks are in.”

Debt elimination as a form of racial justice?

The best way to rectify the growing problem of student loan debt, both Perry and Bishop argue, is to totally eliminate it. Doing so would be a form of racial justice, many Black borrowers told Bishop.

One year ago, The White House directed the Department of Education to look into the president’s legal authority to unilaterally cancel student debt. But redacted documents obtained by the debtor’s union, The Debt Collective, which Brooks is a member of, reveal that the findings have existed for months, but have still not been made public.

A person carries a sign during a Cancel Student Debt rally outside the US Department of Education in Washington, DC, on April 4, 2022. Demonstrators gathered to call on President Joe Biden to wipe out all student debt, as the student loan payment pause, put into place during the Covid-19 pandemic, is set to expire on May 1. (Photo by Stefani Reynolds / AFP via Getty Images)

The White House told the PBS NewsHour on April 8 that they have no updates on when the findings of that report would be released and instead encouraged Congress to take legislative action that they would then consider. But some lawmakers continue to push the administration to release the report. While the government continues to wait, the debate over what the president can do continues.

Yu is of the opinion that Biden does have the legal authority to unilaterally and administratively cancel student debt, citing a provision in the Higher Education Act called settlement and compromise.

“It gives the secretary [of Education], and then by extension the president, broad authority to cancel, modify, and compromise any of the student loans in any of the federal student loans covered by Title four. So that’s the basis that folks are using to say that he has authority to cancel student loans,” said Yu.

Others believe that is not the case, including House Speaker Nancy Pelosi.

“People think that the president of the United States has the power for debt forgiveness. He does not. He can postpone, he can delay, but he does not have that power. That has to be an act of Congress,” she said in a press briefing in July.

And many who are against student loan debt cancellation argue that it would be regressive, especially when applied to typically high-income earners like doctors and lawyers who will, in theory, ultimately be able to pay the debt off.

But Perry said that’s based on faulty logic. In a Brookings report he co-authored, Perry reported that 12 times as many borrowers who owe money live in areas where the median income is between $20,000 and $40,000, compared with those who live in areas where the median income is $60,000 or more.

“Because of past historic discrimination you see the the effects on Black Americans more pronounced. But let’s be clear, if you’re white, low wealth, rural community, you need relief as well,” Perry said.

While the administration has, at least temporarily, abandoned full cancellation, students continue to graduate and enter postsecondary education. At Brooks’ school, a public charter school specifically designed for children who aren’t successful in traditional schools, many students there already struggle with homelessness, poverty and transiency. Brooks is careful to impart upon her students what she’s learned about financial literacy and debt the hard way.

There are scholarship opportunities, she makes sure to tell the children and their families at school events. Be wary of signing up for credit cards, she says, as well as high interest debt and predatory payday or check cashing loans — as she did when she was young and didn’t know better.

“I think the system is almost set up in a way that folks from working class and poorer communities – there’s a glass ceiling there, right?” Brooks said.

“We have to take on this enormous amount of debt for this promise of social mobility that isn’t actually going to happen because it’s weighing us down. This debt is preventing us from mobilizing socially, financially. I don’t want my students to go through that.”