The student loan debt crisis has become a major concern in the United States. A new study from Demos shows that 44 million Americans are living with student debt, adding nearly $1 trillion of debt to the economy within a 10-year period.
But who makes up the 44 million Americans?
“It’s a lot of debt out there. But that debt and the burden of that debt is not necessarily being felt equally. It’s extremely difficult for borrowers of color in particular,” Mark Huelsman, Demos associate director of policy and research, told Yahoo Finance’s On the Move. “Black students are borrowing more often and thousands more for the same degree as white students at private and public college.”
According to the 2016 Survey of Consumer Finances, 16.6% of Black students from middle-class families are far more likely to report a late debt payment. However, the study showed a typical white male student borrower has paid off about 44% of the debt they’ve taken on for school within 12 years after they’ve gone.
“After 12 years, black women and black men, of that matter too, owe more on the debt than they originally took out,” he explained. “That’s pretty devastating.”
“I would say fundamentally, this is a problem of disinvestment. When the college-going population was a lot whiter and a lot wealthier, we actually invested at a per student level at much higher rates than we did today,” he added.
The racial wealth gap
Why are borrowers of color paying more than they originally borrowed?
Huelsman noted that white families have an unearned $10 advantage in wealth for every $1 that black households have. “Income is partially the story for sure. Black college graduates, even, have less of a boost in the labor market than white college graduates,” he added.
Huelsman said wealth transfer across generations also explains the disparity. White families are more likely to receive an inheritance or large cash gift from older family members, that could be used for paying off debt.
“There’s a blanket of financial security facing white families that families of color have not had for a number of reasons,” he said.
Ralston Ramsay is a producer for Yahoo Finance’s On the Move.