Debt VS. Wealth: The Weight And Reality Of Student Loans In Black America

September 1, 2015  |  

Photo by Jahi Chikwendiu/The Washington Post via Getty Images

Gregory, a 36-year-old dentist in Houston, TX, has over $400,000 in student loan debt. It’s a hefty bill, but he has a great career to show for it. Amanda is the assistant account manager of valet in Nashville, TN. She is just over $25,000 in debt and went to school for psychology, while Bilal is close to $200,000 in debt as he finishes his Master’s Degree in Urban Planning at Pratt Institute in Brooklyn, NY and works as a housing specialist.

The individuals above show a very small, but very real picture of the student loan debt Black Americans face when trying to get ahead. Receiving a college education was once looked upon as the great equalizer in America. However, African American families are taking much longer to actualize this dream as more Black students depend on student loans than any other group in America.

According to the Urban Institute, over 40 percent of African American families had student loan debt in 2013 compared to only 28 percent of white families. We spoke with financial experts, Historically Black College and University (HBCU) funds and researchers to get a clear picture of the state of student loans in Black America and how we can successfully move from debt to wealth.

“The best way to address student debt disparities in Black families is to end employment discrimination and housing discrimination that keep African Americans from accumulating wealth,” said Sara Goldrick-Rab, a professor at the University of Wisconsin, Madison and the lead author of “The Color of Student Debt.”

Last fall, Goldrick-Rab and her team took a serious look at racial disparities among student loan borrowers and found that the median wealth of white families is $124,000 compared to $16,000 for Black families, causing more and more Black students to depend on loans.

When Gregory went off to college, he had very little help from his family as he was the first to pursue higher education. Now, even with a great career, managing life and kids is no easy task. The dentist, who graduated from Clark Atlanta University and Meharry Medical College, allocates 55 percent of his income to student loans. “I feel overwhelmed,” Gregory told us. “I want to go back to specialize but that would put me in more debt. At the same time I would be making more so I’m actually able to live right; it’s hard.”

According to experts such as Charlene Crowell of the Center for Responsible Lending, the first step in deciding whether to take on students loans is knowing what to look out for.

“The most important thing to ask is ‘will this instruction give me entry into a middle class life?’ That must be a very sober discussion along with what students are naturally drawn to. Students must make a thoughtful decision before the debt,” said Crowell.

While Gregory has the pay advantage that comes along with studying in the medical field, other students are not so lucky to end up with high paying jobs connected to their given field, especially those that focus outside of science, technology, engineering and math.

Does that mean more students need to switch majors? Certainly not; however both Crowell and Goldrick-Rab agree that real research must be done to make sure chosen schools align with desired jobs and the income thereafter.  This is especially true considering more and more African American students are not only taking out large student loans, but are less likely to complete all four years of college.

Goldrick-Rab lived in West Philadelphia and remembers watching younger siblings see their brothers and sisters off to college. “They looked up to them and they want to know what’s going to happen – but if you go and take on debt, drop out and you come back with no degree, the younger sibling looks at you like ‘I’m not doing that.”

Johnny C. Taylor, president of the Thurgood Marshall College Fund (TMCF) has this same concerns.

“The more and more our financially-constrained black families hear college is too expensive or not worth it, the more we reduce the pipeline of future black college graduates. There is a real risk we could wake up 10 years from now and face a reality [of employers saying] ‘We really can’t find enough qualified black candidates for jobs.’ Even well-intentioned employers can’t increase their diversity in the future if diverse talent is in short supply,” noted Taylor.

The TMCF is currently working with all 2016 presidential candidates to increase non-loan options in hopes of making college more accessible for all. However, the responsibility to incite change does not solely fall on those in higher education, but from everyday African Americans who are suffering the most.

“We need to be concerned and make this an election issue. Decide, I’m going to talk to my local community about getting scholarships together. I’m going to get really informed about all of the options to make sure my kids chose the right college and financial structure,” said Goldrick-Rab.

Goldrick-Rab and her team have recommended that the age-old Free Application for Federal Student Aid (FAFSA) undergoes a serious rewriting. Instead of deciding a family’s need based on income, the professors believe the FAFSA should focus on family wealth to create a better picture of who really needs help. But this is just one recommendation, as Goldrick-Rab also believes the FAFSA could be done away with altogether.

“I think we should dramatically simplify the entire system, get rid of the application for financial aid and just make college affordable period.”

Last year, Goldrick-Rab and her colleagues wrote a proposal to make the Associate’s Degree free at all public universities.

“In our proposal it doesn’t actually cost any new money, it involves a reallocation of existing money. We say stop funding the private sector and focuses solely on the public. If you reallocate the funds to the public sector and stop paying for the fourth, fifth, and sixth years of college and we just fund the first two – we have enough money to do it right now,” said Goldrick-Rab.

But what happens to the many Black graduates who have already accrued thousands of debt? Author and CEO Tiffany “The Budgetnista” Aliche creator of the Live Richer Challenge said it’s time to focus more on wealth than debt.

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  • Lisa

    My daughter is attending community college for her first two years. This is a very affordable option that will allow her to learn how to be successful in college while at home where I can guide her. It’s also a chance to leave the mediocre grades of high school behind and work towards a scholarship for her remaining 2 years.

  • Aquarius77

    There are a lot of great points posted here. I think it’s also important for young people to consider alternatives to traditional college. Some students are better suited for shorter programs that focus solely on their interests. While these alternatives may also require student aid, students can see a “light at the end of the tunnel” in terms of a career and not lose focus or motivation because of “irrelevant” classes.

  • Crystal Castleberry

    Yea… I’m in that boat. My only regret is getting involved with Sallie Mae. That was the worst decision I’ve ever made. Don’t take out a private loan unless you have no other option!

  • WhatsReallyGood33

    Stop going to college unless you can afford it debt free. Its a racket that doesnt improve your ability to accumulate wealth over time. Youre better off being creative and developing something to contribute based on your own innate abilities. College is a scam and a way the US economy ensares people thinking they can class hop when they really cant.

  • RB

    I believe student loans should not be a debt that weighs down an individual, like hospital debt. Hospitals look at your income, and the government will give you help and discounts on your hospital bill. Why not college? We went to college (like we were told we were supposed to) then discover the out of college pay doesn’t allow you to pay back loans in a timely fashion, the first 10 years out of school are tough. That’s unfair, and quite frankly a racket.

  • Mrs.J

    I don’t know I always tell people that don’t have money or lots of scholarships to go to community college first.You can always take your general education there and then quickly transfer.It helps a lot.People look down on community colleges when they shouldn’t at all.

    • Neva

      Precisely .

  • GymJunkie43

    Black college graduates definitely live in a different world. We don’t have a Daddy Warbucks to help us out, nor do we benefit from the Good ol boys club to keep fluid, well paying employment.
    However, there are things we can do to make things less burdensome. Go to a real school with a succesful alumni network – not Atlanta Sunbreeze online. Major in something real and minor in the random stuff – Engineering, Accounting, Nursing, etc. And be realistic about the average income for your future job. Unless you plan on being a 25 yr old surgeon, no position will pay you enough to pay back a 6 figure debt load for undergrad

    • Lisa

      College students and their families need to be more realistic about college, their chosen majors and future earning potential. When I went to college, a job was a given. It isn’t anymore. Be smart about where you go, what you study and the cost. Little Tammy can’t major in Basket Weaving at NYU just because she wants to.

      • GymJunkie43

        Exactly. We can’t afford to major in something cute and ornamental. We’re not graduating with a rolodex of connections so we have to to be twice as talented to get the same chances as the well connected people.

  • JA6180

    I am so happy that I went to a non-expensive(at the time) local university where I actually paid my way thru(with some help from pops) by working full time at the nearby mall. I know I missed out on a lot of fun, but as far as Sallie Mae, I only heard of that chick recently this year. She will NEVER get ANY of MY money…sorry bout the rest of you though.

    • Neva

      Im attending community college now to save money and will transfer to Ohio State University when my credit hours are completed. Most black students should not go to a university first its expensive and pointless to pay so much for school when you could go to a junior college then transfer. Universities have become a business and Sallie Mae is a fraudulent thief.

      • JA6180

        I respectfully disagree. I think young black students should really hard on finding different types of grants and scholarships that’ll help with the cost. I actually found one for left handed people. All it takes is a little curiosity for kids to find out what they wanna know.

      • Lisa

        I agree 100%. If the student has not earned a scholarship and has to finance the majority of the tuition, then that is not the school for them. And let’s face it, there are a lot of kids in school at 18 who are not ready to buckle down and are wasting their money. Know your student. Some of them need to stay home a little longer and grow up more before they go off to school. For them, the local cc is a good choice.

  • Ce1999

    I feel like I am all over belaboring this point, so apologies. lol If I could go back, I would have taken out less money in loans or no loans at all and applied for more scholarships. I was a fairly good student but didn’t pursue that harder. Now I’m paying back debt – thank God for a full time job – but it’s important to stick to it while in college so that you can afford a job that pays them back. Choose the right major that will draw an income. I paid off my undergrad just recently and look forward to tackling my huge grad school debt. So it is possible to get out of it.

    • truffhurts

      How long did it take you to repay your undergrad loans?

      • Ce1999

        I graduated in 2009, so about 6 years. However, I received a lump sum of cash this year and put it immediately towards the outstanding amount I had. Undergrad is also my smallest loan. My grad loans will probably take maybe 2-3 years to pay, because I am on a debt snowball plan where I pay done my smallest consumer debt (my car) before getting to it. Hope that helps and hang in there. Just chip away at it if you can.

        • truffhurts

          Oh, wow thanks.

  • Happy

    $400,000 in debt? That’s a lot. I agree with the people in the article, the family’s wealth has a contributing factor. The good news at least is the dentist with the hefty student loans can create a proper foundation for his children and help them go to college without resounding student loan amounts. He has built a foundation so his future generations will be more okay than he was.

    • NOPe

      I agree with the point that generational wealth plays a huge part in the racial disparities. Unfortunately, Black people as a whole are still getting our financial and professional footing by still paying the heavy dues for future generations while White people in particular had the luxury of doing that for the past few hundred years prior.

    • JA6180

      400K…that’s like two 4 bedroom homes in Bear, DE.