When it comes to student loan borrowers of color, policymakers should explore the shades of gray
Federal Policy

When it comes to student loan borrowers of color, policymakers should explore the shades of gray

The last recession consumed the modest wealth of Black and Hispanic communities, further deepening racial wealth divides and burdening college students from these communities with higher loan debt. Today, the United States is experiencing another severe economic downturn, with record-high unemployment fueled by a pandemic—and it’s affecting college affordability even more dramatically.

As Congress and state legislatures search for ways to make college more affordable, people with direct experience—including many researchers of color— aren’t in the room where it happens. Diversity is absent as borrowers of color face an array of special challenges that vary by race, ethnicity, and gender.

Students who are Black, Hispanic, and Native American tend to have higher unmet financial need, incur more student loan debt, and struggle financially to stay in school. The 2016 National Postsecondary Student Aid Study found that 85 percent of Black graduates leaving college with bachelor’s degrees had taken out student loans. The same was true of just 69 percent of white students. A 2019 report by the Center for Responsible Lending, NAACP, and other partners helps put these types of figures in context for borrowers of color.

Far too often, people of color with relevant expertise are left out of discussions about college affordability. What typically occurs is that well-intended white policy advocates speak in broad terms about the financial challenges these students face, and then fall back on a familiar—and limited—set of policy choices.

A more robust and productive dialogue would seek to address underlying factors such as wealth inequality—caused in part by race-based “redlining” in home lending, as well as issues of redlining in the student loan market.

Because of systemic racism that reduces wealth, policies designed to help low-income households are not sufficient. Systemically embedded challenges remain, as shown by uneven default rates by race despite the availability of income-driven repayment. Here are some other issues that are often overlooked when people of color with expertise are missing from policy conversations:

  • African Americans struggle the most with loan repayment and default. Why? Because many such students are from less wealthy families who can’t help pay for school or repay loans. There also are disturbing differences in education’s return on family wealth. The average Black college graduate has less wealth than a white high school dropout. That’s a significant factor when combined with high debt, especially if a Black student doesn’t earn a degree.
  • Among these students, those at Historically Black Colleges and Universities fare worst. Why? Because HBCUs, established in response to systemic racism, are woefully underfunded. They cannot offer students much in the way of scholarships, and the students who attend them have higher financial need. This can cause ripple effects in which students borrow to attend school, fall behind on loans, drop out to make money, and never catch up financially —or academically.
  • African American women shoulder the heaviest debt loads. Why? Because they face the added burden of gender discrimination in the workforce when it’s time to repay their loans—even as many also are trying to stay safe during the pandemic while working in health care and other frontline service fields.

Latino and Native American borrowers encounter difficulties, too. While borrowing among Hispanic students is much lower than among other groups, 35 percent of those who borrow wind up in default. In contrast, about three-fourths of Native American students take out loans, but only a quarter earn a degree.

To better understand and address these complexities, we set out to amplify the voices of a diverse group of experts whose research can inform and educate state and federal policymakers. Our organization, Lumina Foundation, is an independent, private foundation in Indianapolis that’s committed to making opportunities for learning beyond high school available to all. Our borrowers-of-color project goes to the heart of our mission to make learning affordable and accessible—and underscores our commitment to racial equity.

As we see it, without the expertise that voices of color bring, mainstream policy debates on affordability and student debt run the risk of misinterpreting data and trends, leading to findings and recommendations that miss the mark. Relationships among affordability, borrowing and debt, and student success look different across different communities of color. But the distinctive experiences of people who are Black, Hispanic, or Native American are rarely explored in appropriate depth. Viewing these disparate experiences collectively can gloss over important differences and blunt the development of nuanced, effective policy solutions.

In an effort to identify and elevate what works for borrowers of color, Lumina has awarded research funding to the Institute on Assets and Social Policy at Brandeis University, the American Indian College Fund, the University of North Carolina’s School of Law, UnidosUS, and UNCF’s Frederick D. Patterson Research Institute.

We also formed a working group of respected experts from academia, advocacy, law, and policy to contribute ideas to the conversation. Three experts, who will share insights in Q&A pieces that accompany this article, emphasize the importance of asking the right questions and addressing misperceptions—such as the widely held belief that Native Americans often go to college for free because of casino revenue or government support.

In fact, Amanda Tachine at Arizona State University says one-fourth of Native Americans live below the poverty line.

Our project is focused on helping those African American, Latino, and Native American students who have the most trouble paying for college and repaying their loans, all while facing the toughest financial outlook and enduring longstanding inequalities. To ensure these students achieve fair outcomes in education, work, and life, we first must understand the enormous barriers they face.

College degrees and other credentials are more critical than ever for gaining a fair shot economically. Meanwhile, large barriers exist for people of color, who often must earn more credentials to compete in the job market because of discrimination, which increases their need to borrow and assume greater financial risks.

Something about this picture is fundamentally broken, and it’s not the borrowers. Only when policy debates about borrowers of color include the expertise of people of color can we begin to forge thoughtful solutions that narrow the wide disparities in educational attainment after high school.


Katherine Wheatle and Wayne Taliaferro are Lumina Foundation strategy officers based in Washington, D.C. To learn more about their work on “Borrowers of Color,” click these links to read interviews with Amanda Tachine and James David “J.D.” Lopez, Dominique Baker, and Janette Martinez.


Borrowers of Color Working Group:

Fenaba R. Addo, associate professor in money, relationships, and equality (MORE), School of Human Ecology, University of Wisconsin at Madison.
Dominique Baker, assistant professor of education policy and leadership, Simmons School of Education & Human Development, Southern Methodist University.
Joanna K. Darcus, staff attorney, National Consumer Law Center.
Denisa Gándara, assistant professor of education policy and leadership, School of Education & Human Development, Southern Methodist University.
Jason Houle, associate professor of sociology, Dartmouth College.
Dalié Jiménez, professor of law, University of California, Irvine.
Jameson David “J.D.” Lopez, assistant professor of educational policy studies and practice, College of Education, University of Arizona.
Chris Nelson, assistant professor of higher education, Morgridge College of Education, University of Denver.
Sarah Sattelmeyer, project director, Student Borrower Success, Pew Charitable Trusts.
Amanda R. Tachine, assistant professor of higher education, Mary Lou Fulton Teachers College, Arizona State University.
Desiree D. Zerquera, associate professor of leadership studies, University of San Francisco.

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