2016 News

CSD research reveals racial disparities in education debt

New research from the Center for Social Development (CSD) at Washington University showed that low- to moderate-income (LMI) black students and graduates accrued $7,721 more education debt than their white counterparts, based on a sample of LMI households. The journal Children and Youth Services published the findings Saturday online.

“This study demonstrates that while the risk of needing to borrow is relatively similar for LMI Black and White students, the risk of debt accumulation is higher for the former group,” the authors, led by CSD Associate Director Michal Grinstein-Weiss, write in “Racial disparities in education debt burden among low- and moderate-income households.”

The new research establishes racial disparities in education debt among a low-income population and shows that significant disparities in education debt persisted even after LMI black students earned their degree. As the authors contend in the paper, most of the existing evidence on this topic has not examined the unique position of LMI borrowers.

The authors also found that differences in household socioeconomic factors between LMI white and black borrowers did not explain this gap. “Pursuing higher education to earn a college degree remains a strong predictor of upward mobility and wage growth over a lifetime,” the authors write. “Yet as LMI students borrow for college and weigh expected returns, the risk of excessive debt accumulation remains high for Black students, particularly those from low-income households.”

The findings from this study add to the recent focus on student debt among American college students. Education loan debt has reached $1.2 trillion dollars in the United States, surpassing credit cards as the largest form of consumer debt, the authors note. Among graduates who earned a four-year degree in 2012, 63 percent of whites and 81 percent of blacks borrowed to pay for their degrees.

The study’s authors offer promising policy solutions to offset the possible consequences of high student debt burdens for LMI black borrowers. “[E]merging evidence has suggested that designated savings vehicles, such as Child Development Accounts and 529 savings plans, may serve as vehicles for improving college access, affordability, and success for low-income students,” the authors write. “Prior work has consistently demonstrated the importance of asset-building products for generating the household liquidity needed to finance long-term, educational investments.”