Crisis-level student debt hinders economic progress in many ways, including reinforcing racial wealth inequality.

In order to finance higher education, Black families—already disadvantaged by generational wealth disparities—rely more heavily on student debt, and on riskier forms of student debt, than white families do. The additional risks Black students face when taking on student debt are exacerbated by other disparities in the higher education system, including predatory for-profit colleges that engage in race-based targeting. The disparities continue after these students leave school. Due to lower family wealth and racial discrimination in the job market, Black students are far more likely than white students to experience negative financial events after graduating—including loan default, higher interest rate payments, and higher graduate school debt balances. This means that while many Black families currently need to rely on debt to access a college degree and its resulting wage premium, the disproportionate burden of student debt perpetuates the racial wealth gap. To fairly evaluate any higher education reform proposal, we must understand the ways that these dual burdens—less wealth and more debt—lead to worse outcomes for Black students than white students.

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In 2019, Americans collectively owe more than $1.6 trillion in student debt,1 and the number of families burdened has grown rapidly: One in five US households now has student loan debt, compared to one in 10 in 1989. 2 . In the face of these overwhelming numbers, many policymakers have begun to offer their own tuition-free and debt-free college policy plansand even debt cancellation proposals—as a way to reinvest in higher education and America’s students. These proposals have sparked a fierce debate about who ought to benefit from this endeavor or how new resources should be allocated. Too often, however, these conversations overlook the critical background context of who currently benefits and loses when much of the higher education system is financed through individual debt rather than upfront public investment.

To provide this context, this report compiles the research on racial disparities both in the use of student debt and in higher education outcomes, specifically focusing on disparities between white students and Black students. In order to do so, we bring together two streams of research that are often siloed: research from experts on higher education access and success alongside research from economists, sociologists, and others who specialize in race inequality and, in particular, the racial wealth gap. These researchers tend to draw on different sets of data and focus on different outcomes, and thus often identify different problems—yet both are critical to designing meaningful reforms. When we bring these strands of research together, we get an increasingly clear picture: the racial wealth gap, high student debt levels, and unequal higher education access and outcomes for students of color—and particularly women of color—continuously reinforce each other.

This report highlights the need for higher education policies that get students of color both into and through college in order to realize the wage benefits of a college degree. It also underscores the need to take into account the structural inequalities and discrimination that shape every step of the experience of students of color both in college—from paying for college to accessing academic opportunities—and in the job market after leaving school with or without a postsecondary credential.

In Section 1 of this report, we describe how historic policy decisions, both in higher education and in the economy more broadly, have contributed to these structural racial inequities. In Section 2, we examine key findings across disciplines from researchers who have studied student debt with a racial lens. Then, we conclude by discussing what policy changes could help break the cycle connecting student debt and the racial wealth gap. This report is followed by an appendix that looks more closely at the data sets used by researchers in different disciplines and an annotated bibliography.

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About the Authors

Suzanne Kahn is a program manager at the Roosevelt Institute, where she works on higher education and the Great Democracy Initiative. Kahn holds a PhD in American history from Columbia University and earned her BA from Yale University. 

Mark Huelsman is the associate director of policy and research at Demos, where he helps shape a policy and research agenda that seeks to address structural economic exclusion and advance bold democracy reforms. He also leads the organization’s policy work on college affordability, student debt, and racial equity in higher education. Prior to Demos, Huelsman worked as a research analyst at the Institute for Higher Education Policy, as a policy analyst at New America, and as a legislative assistant at the Brookings Institution. A native of Cincinnati, Ohio, Huelsman holds a BA in government and politics from the University of Maryland, College Park, and an EdM in international education policy from Harvard University. 

Jen Mishory is a senior fellow at The Century Foundation— working on issues related to the workforce, higher education, and health care—and a senior policy advisor. Prior to joining TCF, Mishory co-founded and served as the executive director of Young Invincibles, which has grown to become the largest advocacy organization in the country representing young Americans. She received a BA in economics and political science from UCLA and a JD from Georgetown University Law Center.