New Study Demonstrates Damning Impacts of Student Loan Debt by Race and Ethnicity

A new study from the JP Morgan Chase & Co. Institute puts numbers to an inequitable reality that many NCAN members and the students they serve experience every day: disproportionate impacts of student loan debt.

The report has four key findings that illustrate the burden of student loan debt:

1. The median student loan borrower pays just 3.8% of their net income in student loans, but lower-income and younger borrowers (who are often, but not always, one and the same) can see burdens double or even triple that.
2. Among individuals involved in any kind of student loan repayment, 39% are helping someone else pay down their student debt, and within that 39%, 27% have no student loan debt of their own. Among the 61% of individuals paying their own student debt, 18% aren’t making any payments toward their loans.
3. Students from low-income backgrounds and older borrowers are more likely to be behind on their student loans, and the report estimates that 7% won’t be able to pay back their loans.
4. Black borrowers are less likely to be making progress on their loans. 13% of Black borrowers are projected to never pay back their loans, which is nearly double that of White borrowers (6.8%) and 50% higher than Hispanic borrowers (8.4%). Black borrowers were nearly four times more likely to have made no payments against their loan than White borrowers.

These findings are unsurprising, but they are devastating nonetheless for communities of color. These debt burdens are an albatross on individual students and their families, and more broadly they stunt economic development in communities of color by making home ownership, business formation, and full participation in the economy difficult if not impossible.

The report notes that, “the economic impacts of COVID-19 are likely to exacerbate the burden of student loan debt, particularly for those already most burdened” and suggests that “targeted debt assistance programs could be expanded to alleviate the burden of existing student loan borrowers.”

One concrete policy proposal the paper suggests is to “help additional borrowers benefit from improved access to existing payment assistance programs, including income-driven repayment programs” by reducing the paperwork necessary for signing up for these plans. Some advocates have suggested automatic enrollment in income-driven repayments may be a worthwhile policy change that would get students into a plan that lowers their burden without relying on students opting in.

Other proposals made in the paper include “more avenues for payment assistance designed for parents” and “to allow for restructuring or forgiveness of student debt through a bankruptcy-like process.”

NCAN, through our policy efforts, works every day to address the policy conditions and obstacles that contribute greatly to these inequitable conditions for students of color. Having these data from this new report offers another brick in the evidentiary wall which continues to demand urgency and attention from policymakers and the public.