Racial Discrimination and the Student Debt Crisis

Aug 12, 2020 by

By no accounts is the student debt crisis helping young men and women prepare for their futures, financially, but by all accounts the difficulties surrounding student debt are worse for people of color. As is the case with so much in this country, the reasons are very deeply rooted and one of the many issues that stems from the nation’s dark history of systemic racism.

Understanding the connections require a willingness to peel back the curtain, and a high cultural intelligence, and though actions are being taken to reverse some of the effects, it’s a cause that hasn’t yet received a lot of steam in neither popularity nor legislation.

The Issues

The anxiety in teens and students in their early 20s that comes with mounting debt and an approaching graduation date is pretty universal as far as racial demographics go, however the risks for people of color are generally much higher. It’s simply a fact that a larger percentage of African American and Latinx students come from lower-income families, and thus have less options if work is difficult to find and student debt interest starts to eat away at their credit score. A pretty telling statistic is the fact that 18% of white students who drop out default after 12 years of entering college while, in contrast, 21% of black students who graduate end up defaulting at the dozen year mark.

For many white students, a parent or well-off family member is often an option when it comes to helping relieve student debt. For students who come from families without these financial fail safes, the options are much fewer and the consequences can be lifelong when it comes to applying for loans, and even jobs. On a positive note, and relative to that, low-income (often POC) students have higher success rates when it comes to getting jobs that make the college investment a good one.

Another issue is the fact that racial inequality when it comes to hiring processes is still very much an issue in parts of the country, making the absurd loans a bigger gamble for students of color.

The Effects

The effects of the negative racial bias that exists both implicitly and openly goes much deeper than just students struggling to pay back their debts. School that have historically been black universities also face issues regarding large donations from alma-mater and other groups, as compared to historically white universities.

The financial difficulties faced by minority students ultimately result in less of them being able to try to attain an education. It’s a simple thought that if a student has to think about debt after college there is a better chance he or she might choose a different path. This is only causing growth in the white-black financial gap, as people with degrees do, indeed, earn more in their lifetimes.

At the personal level, students with high debts have more difficulty securing auto loans, home loans, etc., and poor credit caused by student debt can lead to a literal lifetime of difficulty when looking for places to rent or important things to buy.

How to Reverse Them

Legislation is the best way to make these trends start to go away. Some very liberal politicians want to completely cancel student debt and they fairly use the selling point of “closing the racial wealth gap” as one of the reasons doing so would benefit the country. Laws targeting the practices of predatory universities, which often target minorities in greater numbers than their white counterparts, are also making their way to lawmakers’ desks in some cities.

From a personal standpoint, simply listening and educating on the much deeper issues that cause things like racial discrimination with student lending will help make generational changes, as issues this large can’t be fixed overnight.

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