More than 44 million borrowers currently owe a collective $1.48 trillion in student loans. When we break down this debt burden, we find it's not distributed equally.
Instead, a recent Student Loan Hero study shows that black and Hispanic students shoulder more debt than white students, and that both of these groups face higher rates of default.
Defaulting on federal student loans can have severe consequences, including wage garnishment and damage to an individual's credit score—issues that can weigh on a person's finances for decades.
The burden of student loan debt can also impact efforts to build wealth after college. According to public policy organization Demos, student loan debt gets in the way of buying a home and saving for retirement.
These consequences further aggravate the inequalities that cause students of color to take on more debt in the first place. Given this, it's unfortunately not surprising that black and Hispanic students must borrow significantly more, and at greater rates, to afford college tuition.
If policymakers fail to protect students, this historical wealth gap could only continue to widen and the cycle of debt and income inequality will just get worse.
Although racial inequity in student debt is a complex issue with no easy answers, education leaders and policymakers must take steps to reduce borrowing before students get to college, as well as to protect borrowers after they graduate.
First, the Education Department should re-evaluate its guidelines for which colleges are allowed to distribute federal student loans. Some for-profit colleges, for instance, have saddled students with debt while failing to prepare them for the job market.
Graduates of particularly predatory schools have recently struggled to gain loan forgiveness from borrower defense discharge, which is meant to protect students at schools that violate consumer protection laws. The Education Department needs to preserve and fortify these protections for defrauded borrowers.
Along with protecting borrowers, the Department of Education must also provide easier paths to loan forgiveness and income-driven repayment plans. Currently, the government only provides forgiveness after 20 or 25 years on an income-driven plan. But some experts suggest the student loan crisis could be solved with immediate and total forgiveness of all of America's $1.48 trillion debt.
At the very least, Federal Student Aid could protect borrowers by automatically enrolling students in income-driven repayment plans, thereby helping them avoid default. Right now, borrowers must complete tedious paperwork to sign up for an income-driven repayment plan, assuming they understand their repayment options in the first place.
If they don’t know about income-driven repayment and can’t pay their bills, their loans could fall into delinquency and ultimately, into default.
Colleges can also do their part to solve the student loan crisis. For instance, more schools could commit to covering 100 percent of students' demonstrated financial need. This promise would be one way to promote college access and ensure students get their degree without the massive student debt that too often goes with it, especially for students of color.
Beyond colleges and universities, this country as a whole needs to have a serious conversation about college costs and people's ability to take on those costs. Despite the debt it often carries, a college degree remains valuable and typically leads to higher salaries and greater social mobility.
If everyone is going to enjoy the benefits of higher education, leaders and policymakers must find the means to check rising tuition costs and promote access for students of all socioeconomic, racial, and ethnic backgrounds.
If you're looking for ways to manage your student debt, check out this resource on income-driven repayment plans, along with these lists of student loan forgiveness and repayment assistance programs. To help young people avoid accumulating too many loans, learn how to prevent taking on too much student debt here.