Eliminating student debt for low- to middle-income families could dramatically narrow the racial wealth gap between black and white households, according to a joint study by liberal think tank Demos and the Institute for Assets & Social Policy at Brandeis University.
Though 43 million Americans across the racial and socioeconomic spectrum have nearly $1.3 trillion in college loans, black households are far more likely to have student debt at all income levels. About 54 percent of young African Americans between the ages of 25 and 40 have student loans, compared to 39 percent of their white counterparts.
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Even though African Americans are more likely to have student debt, they are less likely to have graduated from college, making it more challenging to find work that pays well enough to repay the debt, according to an earlier Demos study.
While carrying a high debt load can lead students to drop out of college, even balances below $10,000 can be a struggle to someone without resources. The largest number of people who have not made a payment on their student loans in at least nine months are those with less than $5,000 in debt and often no degree, according to the Federal Reserve Bank of New York.
“It’s not often the high-balance students with the most pressing case for relief,” said Mark Huelsman, a policy analyst at Demos and co-author of the report. “If we provide an income eligibility threshold, those who have taken on student debt but have not yet seen the payoff that an education can bring, we’d see something different.”
