Student Debt Op-Ed

Last month, the Federal Reserve Bank of New York released a report indicating that student loan borrowing rates and amounts were the highest in predominately-black zip codes. The report found that 23% of residents in majority-black zip codes borrowed loans, as compared to 17% in majority-Latinx zip codes and 14% in majority-white zip codes. Of those who borrowed in majority-black zip codes, 18% of borrowers ultimately defaulted as compared to 9% in majority-white zip codes.

The findings of the report are sadly not surprising. While America at large is currently experiencing a student debt crisis, its impacts are felt differently depending on racial and socioeconomic status. Black Americans, in particular, are still experiencing the economic impacts of slavery, white flight, redlining, and other forms of institutional racism.

In response to this report, Delece Smith-Barrow, a senior editor for the Hechinger Report, identified data as a potential solution. She specifically mentioned College Scorecard, a tool developed by the U.S. Department of Education in 2015, to provide students and families with college-level data on college costs, graduation rates, and post-graduation earnings.

While tools like College Scorecard that allow students and families to better understand financial aid and loan borrowing are certainly important, information alone is not sufficient to address the debt issues that disproportionately affect Black students and families. Financial aid funding and policies must also be reformed to make college more affordable for students, while simultaneously reducing the amount of loan debt students are expected to take on.

For the past few decades, federal grant funding has not kept pace with rising college costs. The maximum annual award for the Pell Grant---the primary source of need-based federal aid---was set for $6,195 for the 2020-2021 academic year. Students can often take advantage of additional grant funding at the state level, as well as private scholarships. 

While there are students who are able to graduate from college without debt, loans are an inevitable reality for most when paying for college. In order to minimize current default rates (that, as the aforementioned report has found, disproportionately impact students in majority-minority zip codes), students and their families need to receive financial counseling that enables them to take on minimal or manageable debt. Unfortunately, many of the students living in the majority-Black or majority-Hispanic zip codes are the same students who are negatively impacted by high counselor-student ratios that can inhibit students’ access to personalized financial aid counseling.

There are non-profit organizations like uAspire and the American Student Assistance Organization that are currently seeking to address this issue by providing students of color and students from low-income backgrounds with the financial information and resources necessary to access an affordable post-secondary education. In conclusion, in order to sufficiently address the race-based disparities in loan borrowing and default rates, there is a glaring need for increases in federal and state grant funding.