Student center

Black women are twice as affected by student debt

By Charlene Crowell

(Trice Edney Wire) – In mid-June, the Federal Reserve, the nation’s central bank, raised interest rates in hopes of curbing rising inflation and deterring a full-scale recession. At the forefront of its responsibilities, the duty of the Fed is to develop an “appropriate monetary policy”.

For much of black America, many would appreciate the money itself – funds to provide a stable daily life, the ability to get rid of debt without worrying about whether families will have enough money to cover the expenses of the month, and even a little more left to face what the future can hold for us.

Student debt remains a stubborn barrier that prevents black Americans from achieving short-term financial stability and long-term financial wealth. According to the Institute on Assets and Social Policy, after 20 years of repayment, the typical black borrower still owes 95% of their cumulative total borrowings, while white borrowers in a similar situation have reduced their debt by 94% – almost half of white borrowers holding no student debt at all.

After more than two years of the COVID-19 pandemic complicating family finances, the ability of many working Americans to maintain economic stability is approaching a breaking point. Moreover, because of historical racial wealth inequalities, these and other impacts are felt most harshly by Black America in general and Black women in particular.

A new study from the Center for Responsible Lending (CRL) analyzes how women’s finances have changed over the past two years. The study, titled Resilient But Deeper in Debt: Women of Color Faced Greater Hardships Through COVID-19, shows how the lives of these women have changed dramatically as a result of the pandemic and worsening student debt.

The report says black women have faced “a double whammy of rising debt and declining savings.”

CRL analyzed publicly available data and also commissioned four focus groups of ethnically diverse women with varying levels of education who lost their jobs or were laid off during the pandemic.

For context, it is relevant to note that:

• Between December 2019 and March 2022, 1.2 million women left the labor market;

• Between February 2020 and April 2020, nearly 22 million jobs were lost; and

• In 2021, black and Latina women were twice as likely as white men to report being behind on rent or mortgage payments.

Overall, the findings indicate that the widespread disruption to employment due to the pandemic has had a profound impact on women, their families and their finances, the report says. “While a typical white male borrower pays off nearly half of his balance within 12 years of entering college, a typical black female borrower’s balance increases by 13 percent.”

Additionally, about two-thirds of the $1.7 trillion federal student debt burden is borne by women. Black women are twice as likely to owe more than $50,000 in undergraduate debt compared to white men. Black and Latino borrowers generally have higher loan balances than white women. As a result, student loan repayment difficulties for women of color are higher and strain the ability to cover their family’s day-to-day expenses, especially due to rising food and housing costs.

“Because of persistent wage disparities and little or no generational wealth, women of color have fewer opportunities to pursue a debt-free education or weather an economic or personal crisis,” added CRL researcher Sunny Glottman.

The research found that 60% of black women and 40% of Latina participants owed more than $50,000 in student debt. By comparison, only 29% of white participants owed more than $50,000 in student loan debt.

Although focus group participants found the current federal pause on payments and interest accrual helpful, few felt financially prepared to resume payments when the payment pause expires on August 31, and many anticipated worsening financial difficulties.

CRL is among a growing number of consumer advocates calling for $50,000 in student debt forgiveness per borrower. In addition, CRL also recommends greater investments in higher education at the federal and state levels to support public and private HBCUs.

For example, doubling the annual Pell Grant award that serves many students of color would better keep pace with rising college costs. Other forms of support could provide research contracts and internships.

Retroactively implementing Income Repayment Plans (IDRs) to remove lifetime debt repayments and improving access to the Civil Service Loan Forgiveness Program are additional federal measures that would provide debt relief. unsustainable student of the country.

Inaction on student debt relief should not be an option. Instead, policies must be implemented to relieve, as the report puts it, “an albatross perpetuating a base of financial anxiety.”