Access to a college education is something that everyone should be able to enjoy. Accessibility of federal student loans is something that has helped improve that access. However, these loans can still disproportionately affect different types of people. Even with access to various types of loans, student loans can still discriminate.
Student loans discriminate against African-Americans who are more likely to borrow
The Consumer Finance Protection Bureau found that African-Americans use a combination of private and public loans. This is more than any other race. They used both at a rate of 14%, compared to just 11% for whites. The study also found that African-Americans were more likely to use student loans. Only 50.4% of African-Americans got through college without a loan, compared to 61.5% of whites.
Another study by the Brookings Institution found that black people, when they do borrow for school, borrow more. They will borrow twice as much as others on average. This can set them back as they take longer to repay their loans after graduation. Preventing them from doing other things such as owning a home.
Black borrowers are more likely to default
The study by the Brookings Institution shows that black borrowers are more likely to default on their student loans. The study found that black borrowers are likely to borrow more than non-black borrowers and had a much higher default rate. 37.5% of black people have defaulted on loans, compared to just 12.4% of white people.
The study also found that of those who attend a for-profit institution, 46.5% have ever defaulted. The study shows that black people were more likely to attend a for-profit private institution. These schools are typically more expensive and are known for predatory practices. In fact, 58.2% of African-Americans have ever attended a for-profit university, opposed to only 36.2% of whites and 41.1% of Hispanics.
Black borrowers have less access to private loans
If federal loans are not able to cover their needs, black students may have to turn towards private student loans. However, they are less likely to receive a private loan, and, if they do, it's typically at a worse rate.
An important part of getting a lower rate loan is your credit score. An Urban.org study found that predominantly POC areas were more likely to have sub-prime credit scores than white areas across the nation. This can hurt their access to private student loans, making them more expensive or excluding them altogether. This can cause students to get discouraged and drop out, leaving them with debt and no improved income to help pay for it.
Overall, student loans seem to disproportionately affect black borrowers, who are most in need of aid. They have been hurt by predatory practices by for-profit institutions and other lenders, forcing them to default more on their loans. These unpaid loans can hurt their future chances of being approved for credit and create a cycle of debt / poverty.
