Student Debt Carries Inequity Far Past Graduation

By Virginia Myers
This first appeared on

The fact that student debt continues to soar is troubling enough. Now there is clear evidence that it also deepens the gap between the haves and the have-nots.

The Debt Divide: The Racial and Class Bias Behind the ‘New Normal’ of Student Borrowing” describes the impact of near-universal reliance on student loans: These loans actually extend inequity. They saddle the people who need them most with crippling debt, while others, who are debt-free, are free to thrive. The report comes from Demos, an equity advocacy organization.

Students who graduate with no debt, perhaps because their families can afford the full cost of tuition, can then afford to start families, purchase homes and build lives around fulfilling careers. Those who graduate with heavy loan payments typically come from families with fewer means. With their debts in tow, they have no money for home ownership, for marriage and children, or for choosing careers based on anything but next week’s paycheck. They grab the first job that will help them pay back those loans.

“The Debt Divide” shows a “system that is deeply biased along class and racial lines.” Using data from the U.S. Department of Education, the Federal Reserve and previously published academic research, it demonstrates that low-income, black and Latino students carry higher loan balances, and worse, they frequently drop out under the weight of their loans before they even graduate. “Our debt-based system may be fundamentally impacting the post-college lives of those who are forced to take on debt to attend and complete college,” the report says.

Among the findings:

  • Black and low-income students borrow more, and more often, to pursue a bachelor’s degree. Eighty-four percent of graduates who received Pell Grants (an indicator of low-income families) graduate with debt, compared with just 46 percent for non-Pell recipients. Eighty-one percent of black graduates from public schools borrow, while just 63 percent of white graduates do so.
  • Associate degree borrowing has spiked among black students over the last 10 years. More than half of black recipients of associate degrees borrow, compared with 43 percent of white students, and they borrow nearly $2,000 more than their white peers.
  • Students at for-profit institutions face the highest debt.
  • Black and Latino students drop out with debt at higher rates than white students. Thirty-nine percent of black students drop out with debt, compared with 29 percent of white students.
  • Graduates with student loan debt report lower levels of job satisfaction when initially entering the workforce—11 percent lower than those who graduate debt-free.
  • While people who hold a college degree are more likely to buy a home, student debt could be acting as a barrier to that particular American dream.

These disadvantages can follow a graduate for a lifetime. And for those who drop out before receiving a degree—but still have loans to pay off—the disadvantage is even deeper. “We have created a system in which more underrepresented students take on debt and drop out with debt, thereby saddling communities of color and those with modest means with substantial disadvantages as they enter the workforce,” the report states. “In addition to the inequitable distribution of debt, we also see worrying signs around the impact of student debt on the ability to build wealth and assets, find a satisfying or civic-minded job, or start a business.”

Demos does offer ideas to address the issue, with its Affordable College Compact. The concept calls on states—with support and incentives from the federal government—to ensure that tuition revenue does not exceed revenue from the state. Such a policy would save some students from having to borrow so much to cover their costs.

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