How the Student Debt Crisis Is Even More Crushing for Minorities

How the Student Debt Crisis Is Even More Crushing for Minorities

The $1.3 trillion in national student debt weighs heavily on the shoulders of millions of Americans. For those who happen to be black and Latino, that burden is especially likely to be bruising.

The latest installment of the Mapping Student Debt Project conducted by the Washington Center for Equitable Growth contains some compelling new statistics on the divide between how white households and some minority households endure the strain of student loans. 

The existence of that gap should surprise no one, but the report highlights some specific ways in which failing to pay back loans doesn't simply track with lower income, shedding light on the unique manner in which people of color can be penalized for attempting social mobility in an era of skyrocketing college tuition. 

Read more: 7 Ways Student Debt Can Ruin Your Life

The report: The report finds a strong relationship between the proportion of minorities in a ZIP code and the delinquency rate — the percentage of people who have failed to make payments on their loans for an extended period of time — within that area. 

The way that it manifests on the local level is striking. For example, in Washington, D.C., metropolitan area, higher rates of delinquency mirror the concentration of black and Latino households in an area with a fair amount of precision.   

"ZIP codes in the northeastern part of the District of Columbia and east of the Anacostia River and adjacent suburbs — all of which have the largest shares of African Americans and Latinos — also have delinquency rates that range from somewhat high to extremely high," reads the report.

Los Angeles follows a similar pattern:

While income is the key explanatory factor for the way in which black and Latino households are much more likely to be plagued by unpayable debt, it's not a simple correlation. That's because the households that are in between the very poor and the well-off are more likely to have members who pursue higher education and take on higher levels of debt that can't be paid off. In other words, among blacks and Latinos, it's the middle class that's faring worst in terms of delinquency.

What's the explanation? The report presents a number of variables that explain the unique plight of middle class minority borrowers. One likely contributor is the way that credit markets discriminate against minorities. 

"Even after controlling for key risk factors, African Americans and Latinos are disproportionately served by high-cost credit providers who provide less generous terms and more onerous repayment requirements," the report's authors wrote.

Black and Latino borrowers are also more likely to have traveled a less traditional path through higher education than their white peers. They're more likely to attend for-profit colleges and less likely to complete a degree, leaving them on average less equipped for the labor market, and thus less able to cash in on the investment they made in an attempt at a degree.

Another major factor contributing to disproportionate delinquency is that black and Latino households have on average a small fraction of the wealth of white households, even when they have comparable levels of income. Being able to dip into savings or rely on the financial cushion provided by owning property is crucial during times of hardship, and goes a long way toward explaining the limited ability for minority households to cope with loan payments.

It's a tragedy that many of the people who need and desire social mobility the most are also the ones most likely to suffer for attempting it.