Study: Student Loans Weigh the Heaviest on Black and Hispanic Students

 September 17, 2018
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Student loan debt weighs more heavily on students of color than on their white counterparts.

For example, if you look only at four-year public colleges, an estimated 86.8% of black students borrow federal student loans to attend, but just 59.9% of white students do the same, according to the National Center for Education Statistics (NCES).

With rising tuition costs outpacing inflation and wage growth, many students are struggling to afford college. In fact, about 44 million Americans owe over $1.48 trillion in student loan debt.

But according to our in-depth analysis of data from Demos and NCES, black and Hispanic students are paying more when it comes to student loans than white students.

Key findings: Students of color carry the most student debt


  • Black students borrow federal student loans at higher rates than other groups of students. An estimated 77.7% of black students borrow federal student loans to pay for a higher education. This figure is significantly higher than the national average for all students (60%) and for white students (57.5%).
  • Among class of 2012 graduates, Hispanic and black students graduated with higher amounts of student debt from private nonprofit colleges than white students. Black students also borrowed more at public colleges than white students.
  • Among black students who started school in 2003, 1 in 2 defaulted on student loans within the following 12 years. Black students also saw their starting balance grow by a median 113% in that time frame. The rates of default were lower for Hispanic (36.1%) and white (21.5%) students.

77.7% of black students borrow federal student loans to pay for college


When the NCES looked at rates of student loan borrowing by race and ethnicity, it uncovered an undeniable fact: Overall, black students are more likely to take on debt to earn a higher education. This is true at public and private, two-year and four-year, and for-profit and nonprofit schools.

The disparity is greatest at public four-year colleges, where black students borrow at a rate of 86.8%. Across all types of colleges, black students borrow at a rate of 77.7%, a figure significantly higher than the overall average of 60%.

Hispanic students also borrow at relatively high rates: 65% at public four-year colleges and 73.5% at private four-year colleges. However, Hispanic students borrow at a lower rate (39.9%) for public two-year colleges compared to white (46.4%) and black (62.5%) students.

“Not only are students of color more likely to borrow more for a degree, and borrow in higher amounts for the same degree, but they’re more likely to struggle to repay student loans than white students,” said Mark Huelsman, a senior policy analyst for Demos. “Students of color are also overrepresented at for-profit colleges and universities which account for a very large proportion of student loan defaults.”

The rates of borrowing across all groups are high at for-profit colleges. This is a worrisome fact in light of the questionable practices of some for-profit schools. Students who go into debt for a for-profit institution might graduate without the qualifications or skills training they were promised.

Black students also graduated with the highest amount of debt from public colleges in 2012 — $29,344, on average. Hispanic students, though, had the highest burden among those who attended private colleges, with an average debt of $36,266.

These numbers are likely even higher today. The average college graduate in the class of 2016 left school owing $37,172. As tuition rates continue to rise, students are going into greater debt to pay for their degree.

High student debt goes hand in hand with low income


No discussion of student debt and race would be complete without a look at household income.

“We cannot think of student loan debt in isolation from other areas of our economy,” said Huelsman. “For example, long-standing racism in the labor market has resulted in a country where black families with college degrees have lower average net worth than white families with a high school education or less.”

Twenty years ago, white households held a net worth seven times that of black households and six times that of Hispanic households, according to Demos data that Huelsman noted. After the recession, that disparity increased to 13 times and 10 times, respectively.

Dr. Robert Kelchen, an assistant professor in the Department of Education Leadership, Management, and Policy at Seton Hall University, discussed how students of color can be affected by economic inequality.

“The big issue is the large wealth gap between minority and white families,” Dr. Kelchen said. “It’s a lot harder to repay loans when nobody in your family can help you pay them off. Unemployment rates also tend to be higher for black and Hispanics, which makes repaying loans more difficult.”

The graph above shows the difference in median household earnings among races. Black households earned $39,490, Hispanic households earned $47,675, and white households brought in $65,041. Asian households had the highest median income at $81,431. Correspondingly, Asian students had the lowest rates of borrowing for college.

The unequal burden of student loan debt further aggravates disparities, since a big loan payment can make it difficult to build your career, grow your income, and achieve financial independence.

In 2014, among workers aged 25 to 34 who held a bachelor’s or higher degree, black households earned 23% less than the median for the overall population. Hispanic households earned 25% less.

If you’re struggling to make payments on federal student loans, speak to your loan servicer about your options. You could go on an income-driven repayment (IDR) plan, enter forbearance, or even pursue student loan forgiveness options.

Although these solutions don’t address the root problems that lead students into debt, they can help you manage your situation and avoid student loan default.

Indebted black students have the lowest graduation rates


While black students are more liable to borrow to pay for college, they also have the lowest graduation rates.

Among bachelor’s degree-seeking students entering a four-year program in 2008, just 21% of black students graduated from college in four years. Compare that to the 30% of Hispanic students, 44% of white students, and 48% of Asian students who graduated within that time frame.

According to The New York Times, the cost of college is a major obstacle to graduating on time. Many students can’t afford to continue or become overwhelmed from working long hours while studying for a degree.

Along with unequal graduation rates, we also see differences in educational attainment from adults aged 25 and older. The greatest number of bachelor’s degree holders are white and Asian.

Since a bachelor’s degree can boost earnings significantly over your lifetime, not having one can aggravate inequities among racial and ethnic groups.

Nearly 50% of black students default on their student loans


Student loan defaults are on the rise. The Wall Street Journal reported that the number of Americans in default on student loans reached 4.6 million in the third quarter of 2017.

NCES took a long-term look at the rates of default among students who started college in 2003. It found that nearly 1 in 2 black students had defaulted on a student loan within 12 years of starting school.

Among Hispanic students, the rate of student loan default was 36.1%. Among white students, the rate of default was 21.5%.

“Underrepresented minority students are far more likely to default on their student loans than are white and Asian students, even when conditioning on the type of college they attended and whether they graduated,” said Dr. Kelchen. “Minority students tend to have higher debt burdens and have more difficulty paying these loans off than other students.”

If you’re in danger of defaulting, switching to an IDR plan on your federal loans could help.

“If someone signs up for this program and loses their job, they likely won’t have to make any payments while not going into default,” said Dr. Kelchen. “Be warned that the paperwork for these programs can get tedious, so start it early and reach out to your student loan servicer or your former college for help if needed.”

That being said, signing up for an IDR plan could mean your student loan balance continues to grow. That could leave you in debt longer, even if you could eventually earn student loan forgiveness.

Additionally, black students owed a median 113% of their original balance after 12 years of starting school. White and Hispanic students also had more than half their debt left after 12 years.

Student loans get in the way of building wealth


Student loan debt stands in the way of homeownership and saving for major life goals. An estimated 64% of bachelor’s degree-holding households without student debt own a home. Among degree-holding households with student debt, only 53% own a home.

Further, those with a bachelor’s degree but no education debt have saved an average of $98,687 for retirement. Bachelor’s degree recipients with loans have less than half of that with an average savings of $42,751.

However, those with student debt that didn’t finish college have only saved an average $25,510 for retirement. This shows that while a college degree could set you back financially, it might still be worth the cost.

“Whereas workers could once rely on employer-sponsored pensions to cover their retirement savings, we now have a system in which most people must save for their own retirement in addition to meeting all of these other costs, monthly student loan payments included,” said Huelsman.

“For communities with less wealth, it takes a major toll,” he continued. “The result is that many of the trends that created racial inequality in our economy have only expanded.”

Although a bachelor’s degree still corresponds with higher earnings and assets, its value is undercut if you have to take out student loans.

It also doesn’t help that wage growth has stalled.

“Wages have stagnated for the vast majority of American workers,” Huelsman said. “Employers have engaged in fewer job training opportunities, and other costs in our economy (child care and healthcare to name a few) have increased nearly as much as the price of college.”

How borrowers can overcome the burden of student debt


When you break down student loan debt by race and ethnicity, the disparities within this national burden become clear.

If you’re a student loan borrower, educate yourself by seeking out financial resources to help you deal with your student debt. American Student Assistance, for example, offers free student counseling services.

You can also check out guides on how student loan interest works and how to choose the right repayment plan. The sooner you learn how to manage your student loans properly, the easier it’ll be to pay them off later.

Interested in refinancing student loans?

Here are the top 9 lenders of 2021!
LenderVariable APREligible Degrees 
1.88% – 6.15%1Undergrad
& Graduate

Visit Splash

1.88% – 5.64%2Undergrad
& Graduate

Visit Earnest

2.50% – 6.85%3Undergrad
& Graduate

Visit CommonBond

1.89% – 5.90%4Undergrad
& Graduate

Visit Laurel Road

1.99% – 6.59%5Undergrad
& Graduate

Visit SoFi

1.88% – 5.64%6Undergrad
& Graduate

Visit NaviRefi

1.90% – 5.25%7Undergrad
& Graduate

Visit Lendkey

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

2.13% – 5.25%8Undergrad
& Graduate

Visit PenFed

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021.


2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Interest Rate Disclosure

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.48% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.

Auto Pay Discount Disclosure

You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.

Student Loan Refinancing Loan Cost Examples

These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.

One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.

© 2021 Earnest LLC. All rights reserved.


3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.


4 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of April 29, 2021. Information and rates are subject to change without notice.
 


5 Important Disclosures for SoFi.

SoFi Disclosures

Fixed rates from 2.49% APR to 6.94% APR (with autopay). Variable rates from 1.99% APR to 6.59% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.


6 Important Disclosures for Navient.

Navient Disclosures

1. NaviRefi loans are made by Earnest Operations LLC, a member of the Navient family of companies, subject to individual approval and underwriting criteria. California residents only: Loans made or arranged pursuant to a California Finance Lenders Law license. Additional terms and conditions apply.

– To qualify, you must be a U.S. citizen or non-citizen permanent resident of the United States, reside in a state we lend in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.navirefi.com/help-and-questions. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Loan terms are subject to eligibility. Approval and interest rate depend on the review of a complete application. Loan approval is subject to confirmation that your debt-to-income, free cash flow, credit history and application information meet the minimum requirements. You must have a minimum FICO score to be considered.

– You can choose between fixed and variable rates. Fixed interest rates are 2.75% – 6.04% APR (2.50% – 5.79% APR with Auto Pay discount). Starting variable interest rates are 2.13% – 5.89% APR (1.88% – 5.64% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.

– You can take advantage of the 0.25% Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. NaviRefi rate ranges are current as of June 1, 2021 and are subject to change based on market conditions and borrower eligibility.

– Loan cost examples: These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,250. Your actual repayment terms may vary.

– The information provided on this page is updated as of 06/1/2021. Earnest Operations LLC reserves the right to modify or discontinue (in whole or in part) this loan program and its associated services and benefits at any time without notice. Check www.navirefi.com for the most up-to-date information. Terms and Conditions apply. Call 855-284-4893 for more information on our student loan refinance product.

– Earnest Operations LLC – NMLS #1204917, CA CFL #6054788 – 535 Mission St., Suite 1663, San Francisco, CA 94105.
Navient Solutions, LLC – NMLS #212430 – 123 Justison St., Wilmington, DE 19801. Visit https://navirefi.com/lending-licenses for a full list of licensed states.


7 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.75% Fixed APR with AutoPay.


8 Important Disclosures for PenFed.

PenFed Disclosures

Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.