January 03, 2019

Cortez Masto, Colleagues Lead Effort to Examine and Address Disproportionate Student Debt Burden Among Borrowers of Color

Washington, D.C. – U.S. Senator Catherine Cortez Masto (D-Nev.) joined a letter led by Senator Doug Jones (D-Ala.) to nearly 100 key stakeholders nationwide to solicit feedback that can help improve federal policies for student borrowers of color and make access to higher education more equitable. Stakeholders receiving the letter include experts in education policy and leaders in business, advocacy, academia, civil rights, consumer protection, and women’s issues.

“Students of color are more likely to borrow, borrow in greater amounts, and are less likely to be able to pay down their debt than their white peers – even if they graduate,” the senators wrote. “This disproportionate debt burden can cause significant financial distress and affect their ability to build their path to the middle class, a key goal of the federal financial aid investment.”

“African-American and Latino students still owe more than 100 percent of their loan balance after 12 years of college entry, even if they complete a degree. White students, meanwhile, owe anywhere between 47 to 70 percent of their loan balance depending on the credential they obtained. Even among bachelor’s degree graduates, the African-American-white debt gap more than triples after graduation, due to differences in interest accrual, graduate school borrowing, and ongoing deeper issues related to labor market discrimination, racialized economic hardships, and familial wealth,” the senators continued. “These outcomes are staggering and unacceptable. As members of Congress, we are committed to doing better for these students and ask for your assistance in defining specific proposals the federal government can take to address these disparities.”

In addition to Senators Cortez Masto and Jones, Senators Kamala Harris (D-Calif.), and Elizabeth Warren (D-Mass.) also signed the letter.

A copy of the letter can be found HERE and below:

Dear Stakeholders:

We write to you and other experts to solicit your thoughts and ideas on how to address racial disparities in student debt and the broader challenges faced by students of color in college and career training.

Students of color encounter significant obstacles in higher education. Degree attainment rates are dramatically lower among African-American, Latino, Pacific Islander, and American Indian/Alaska Native students than white students. Additionally, students of color are more likely to borrow, borrow in greater amounts, and are less likely to be able to pay down their debt than their white peers—even if they graduate. This disproportionate debt burden can cause significant financial distress and affect their ability to build their path to the middle class, a key goal of the federal financial aid investment.

The consequences of student loan debt are particularly severe for those who do not complete and those who enroll in predatory, low-quality programs. For example, over half of Latino students do not complete college with a degree or certificate within six years despite entering college at higher rates than before and being the nation’s third fastest growing racial or ethnic group. This is a rate that is nearly 18 percentage points higher than white students. Likewise, nearly 60 percent of African-American students enrolled in college do not complete within six years – a rate that is 26 percentage points higher than white students. Roughly 7 in 10 African-American students who did not complete cite student debt as a primary reason for not finishing school, compared to less than half of white students. Students who drop out with student debt are three times more likely to default on their student loans than students who graduate.

Completion is critical – but it still does not fully insulate all borrowers from bad loan outcomes. African-American and Latino students still owe more than 100 percent of their loan balance after 12 years of college entry, even if they complete a degree. White students, meanwhile, owe anywhere between 47 to 70 percent of their loan balance depending on the credential they obtained. Even among bachelor’s degree graduates, the African-American-white debt gap more than triples after graduation, due to differences in interest accrual, graduate school borrowing, and ongoing deeper issues related to labor market discrimination, racialized economic hardships, and familial wealth. In particular, African-American bachelor’s degree graduates default at five times the rate of white bachelor’s degree graduates, and are more likely to default than white college dropouts.

Finally, we note that not all students of color are even represented in the data available today. The Southeast Asian community is often not included in these trends and analyses of students of color because educational outcomes are often obscured in a larger “Asian” category. Asians are our nation’s fastest growing racial and ethnic group and are predicted to become the largest immigrant population in the country in 2055. We would expect similar educational and debt trends because according to the Pew Research Center, 35 percent of Burmese Americans, 28.3 percent of Hmong Americans, 27.7 percent of Malaysian Americans, 19.1 percent of Cambodian Americans, 16.7 percent of Thai Americans, 14.9 percent of Laotian Americans, and 14.3 percent of Vietnamese Americans live below the poverty line compared to 15.1 percent nationally. Coupled with the fact that over half of Laotian, Cambodian, Hmong, and Vietnamese Americans have not attended or completed college, college cost and aversion to debt should also play a large role in educational attainment gaps for the Southeast Asian American community.

These outcomes are staggering and unacceptable. As members of Congress, we are committed to doing better for these students and ask for your assistance in defining specific proposals the federal government can take to address these disparities. 

Given the complexity and high stakes of this issue, we ask you to share your expertise, insights, and proposals for protecting and empowering students of color, and student borrowers of color, and making higher education more equitable for all. We would appreciate if you shared your responses by February 15, 2019.

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