The black-white wealth gap is fueled by student debt
Student debt is becoming a nearly-universal American experience, but the particulars of that experience can vary widely depending on the color of your skin.
It’s become increasingly clear over the past several years that black student-loan borrowers take on more debt than their white counterparts and struggle to repay it. But new research sheds light on the different trajectories of black and white students during the college-going and student-loan borrowing experience, and the disparate impacts it has on their financial well-being.
“Student debt is going to contribute to the ongoing persistence of the racial wealth gap,” said Fenaba Addo, a professor of consumer science at the University of Wisconsin-Madison and one of the authors of the working paper. “These disparities are large and then they grow over time.”
Indeed, the study finds that the gap in student debt held by black and white borrowers grows by 6.8% each year. As a result, black young adults hold 10.4% less wealth on average than their white counterparts due to differences in student-loan debt.
The working paper is the latest research to indicate that our college financing system, which increasingly requires that families rely on debt to pay for school, is contributing to inequality.
The processes that students use to both accumulate and pay down debt “are racialized,” Addo said. The racial wealth gap means that black students likely have less wealth to draw on when paying for college than their white counterparts, meaning they typically need to rely more on debt to pay for school.
Read the original article on marketwatch.
By Jillian Berman